In the long run,:Multiple choice question.total cost exceeds total revenue.total revenue exceeds total cost.firms earn a normal profit.firms have incentive to enter the market.
Question
In the long run,:Multiple choice question.total cost exceeds total revenue.total revenue exceeds total cost.firms earn a normal profit.firms have incentive to enter the market.
Solution
In the long run, firms earn a normal profit. This is because in a perfectly competitive market, firms will enter or exit the market until they are earning a normal profit. If firms were earning more than a normal profit, more firms would enter the market, increasing supply and lowering prices until a normal profit is achieved. Conversely, if firms were earning less than a normal profit, some firms would exit the market, decreasing supply and raising prices until a normal profit is achieved.
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