Chapter 60, Problem 1MCQ

To determine

Perfectly competitive firm’s profit in long run.

Answer to Problem 1MCQ

(d) A normal profit.

Explanation of Solution

In long run, market equilibrium resulted in zero economic profit which means the firm earns a normal profit, and therefore there is no entry and exit. As the firms are operating at the minimum average total cost mean total revenue equates to the total cost. Hence, option (d) is correct.

There is no loss and no profit; thus, options (a), (b), (c), and (e) are incorrect.

Economics Concept Introduction

Introduction:

In a perfectly competitive market, the firm can sell as much as output at a given price (constant price), therefore marginal cost curve that is the supply curve is horizontal of a perfectly competitive firm. Firms are free to enter and exit whenever they want, and firms cannot influence the price of the market because it is a minute part of the market.