Which statement is true? Group of answer choicesZero economic profits in the long run means that firms make zero accounting profits.Free entry and exit in a competitive industry means that firms make negative economic profits in the long run.A competitive firm in the long run can make positive economic profits.A competitive firm in the long run will always leave the industry as it makes zero economic profits.None of the above.
Question
Which statement is true? Group of answer choicesZero economic profits in the long run means that firms make zero accounting profits.Free entry and exit in a competitive industry means that firms make negative economic profits in the long run.A competitive firm in the long run can make positive economic profits.A competitive firm in the long run will always leave the industry as it makes zero economic profits.None of the above.
Solution
The correct answer is "None of the above."
Explanation:
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Zero economic profits in the long run does not mean that firms make zero accounting profits. Economic profit takes into account both explicit costs (which are considered in accounting profit) and implicit costs (opportunity costs of using resources). So, a firm can have zero economic profit but positive accounting profit.
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Free entry and exit in a competitive industry does not mean that firms make negative economic profits in the long run. In fact, in the long run, firms will enter or exit the market until economic profit is zero.
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A competitive firm in the long run cannot make positive economic profits. If firms were making positive economic profits, new firms would enter the market, increasing supply, lowering the price and reducing profits until they are zero.
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A competitive firm in the long run will not always leave the industry as it makes zero economic profits. Zero economic profit means the firm is covering all its costs, including a normal return on capital, and has no incentive to leave the market.
Similar Questions
Which of the following is true about a monopolistically competitive firm?Group of answer choicesIt can earn an economic profit in the short run, but not the long run.It can earn an economic profit in the short run and the long run.It can earn an economic profit in the long run, but not the short run.It cannot earn a economic profit in either the short or long run.
Which of the following statements is NOT correct about perfectly competitive firms: Group of answer choices They will shut down in the short run if they are making economic losses. They cannot sustain positive economic profits in the long run. They will exit the market, in the long run, if they are making economic losses. They will remain in operation in the short run if they are making positive economic profits. They have no control over the market price.
Firms in long-run equilibrium in a perfectly competitive industry will produce at the low points of their average total cost curves becauseQuestion 4Select one:a.firms maximize profits and free entry implies that maximum profits will be zero.b.firms in the industry desire to operate efficiently.c.firms seek maximum profits and to do so they must choose to produce where average costs are minimized.d.free entry implies that long-run profits will be zero no matter how much each firm produces.Clear my choice
In the long run, a representative firm in a monopolistically competitive industry will end upMultiple Choicehaving an elasticity of demand that will be less than it was in the short run.having a larger number of competitors than it will in the short run.producing a level of output at which marginal cost and price are equal.earning a normal profit, so zero economic profit.
Positive economic profits exist for a firm in the long run if price is aboveQuestion 5Select one:a.long-run variable cost.b.long-run average cost.c.long-run marginal cost.d.long-run total cost.
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