Final answer:
The statement that a firm in a perfectly competitive industry can earn positive economic profits is false in the long run.
Step-by-step explanation:
In perfectly competitive markets, firms may earn positive economic profits in the short run, but such profits serve as a signal for new firms to enter the market. As competition increases due to entry, the market supply curve shifts right, causing prices to fall, which in turn drives economic profits down to zero.
Alternatively, if firms experience economic losses, firms will exit the industry, which decreases total supply, leading to a rise in prices until losses are eliminated. Eventually, perfectly competitive markets reach a long-run equilibrium where firms earn zero economic profits, as all economic profits or losses are driven up or down to zero, respectively, by the entry or exit of firms. This outcome is due to the market's characteristics such as free entry and exit, homogeneous products, and perfect information.
When analyzing economic profits, we can also consider the average cost curve. A firm will continue producing in the short run if the market price is above the shutdown point, which is the minimum point on the average variable cost curve. If the price drops below this point, the firm will cease production as it cannot cover its variable costs. However, as long as price exceeds average variable cost (even if it is below average total cost), the firm will continue to produce in the short run to minimize losses.