Final answer:
Firms that achieve competitive parity will earn average returns, as they only manage to cover their costs including normal profits, without earning excess returns in a perfect or monopolistically competitive market long-run equilibrium.
Step-by-step explanation:
Firms that achieve competitive parity are typically expected to earn average returns. This outcome aligns with the principles of perfect competition and the long-term equilibrium of monopolistically competitive markets.
When a firm is making positive economic profits, it attracts competitors who can erode these profits by increasing their supply, which in turn decreases the original firm's demand and price. This competition drives profits down until they reach a normal level where price equals average cost. At this stage, firms achieve competitive parity and just cover their opportunity costs, including a normal profit, but do not earn excess returns.
In summary, competitive parity corresponds to a situation where firms earn zero economic profits because the price received equals average cost, which happens when firms are unable to differentiate significantly from competitors or when the market reaches a state of perfect competition.