Final answer:
Firms in perfectly competitive markets break even in the long run due to entry and exit in response to economic profits and losses, which lead to a zero-profit equilibrium where P = MR = MC and P = AC.
Step-by-step explanation:
Firms tend to break even in the long run in a perfectly competitive market because of the process of entry and exit driven by economic profits and losses. When firms experience economic profits, new competitors are attracted to the market, increasing the supply and thus pushing down the prices.
Conversely, if firms sustain losses, they will exit the market, reducing the supply and driving up prices. Eventually, this cycle leads to a point where firms produce where P = MR = MC and P = AC, meaning no economic profits are earned, and thus they break even. This point is where the marginal cost (MC) intersects the average cost (AC) curve at its lowest point, which is also known as the zero-profit condition.