Question 21
Market StructuresFirms in perfect competition break even in the long-run because
- A.new firms can not enter the market due to copyright laws.
- B.more firms can enter the industry due to attractive profits.
- C.marginal revenue is greater than marginal cost at all levels.
- D.profits are not enough to repay traders' loans.
Show the answer and explanation
Answer: B (more firms can enter the industry due to attractive profits.)
Explanation
Free entry of new firms competes away abnormal profit, leaving only normal profit.