Question

In the long run in a purely competitive industry,?

1) the industry is composed of a specific number of firms.
2) firms do not have sufficient time to liquidate their assets.
3) entry and exit of firms can occur.
4) plant size is fixed.

Answer 1

In the long run, positive economic profits attract competition and firms in a perfectly competitive market reach equilibrium when economic profits reach zero.

Step-by-step explanation:

In the long run, positive economic profits will attract competition as other firms enter the market. Economic losses will cause firms to exit the market. Ultimately, perfectly competitive markets will attain long-run equilibrium when no new firms want to enter the market and existing firms do not want to leave the market, as economic profits have been driven down to zero.