Final answer:
Perfectly competitive firms do not earn economic profits in the long run due to market entry and exit leading to long-run equilibrium. They continue to operate by producing where price equals average cost, or they may exit the market if not viable.
Step-by-step explanation:
The question addresses the economic profits of perfectly competitive firms in the long run. In such markets, firms can earn economic profits or incur losses in the short run. However, in the long run, these profits attract new firms into the market, and losses may push existing firms out. As a result, the market reaches an equilibrium where economic profits are driven down to zero because entry and exit of firms continue until only normal profits remain, which suffice to keep firms in the industry without attracting new ones.
Therefore, perfectly competitive firms do not earn economic profits in the long run. When economic profits are zero, they neither operate at a loss nor increase their prices. Instead, they continue producing at the level where price equals average cost, which means they break even. If they cannot break even, they may shut down in the long run or in the short run if they cannot cover their variable costs. The correct answer to what perfectly competitive firms do in the long run, when they do not earn economic profits, is: they continue producing at the level where price equals average cost, and if not viable, they may close their business and leave the market.