In long-run equilibrium, all firms in the industry earn zero economic profit. Why is this true?
1.) All firms in perfectly competitive industries earn zero economic profit in the long-run because:
a. firms are price takers, maximizing profit by producing where price equals marginal cost.
b. barriers to entry and exit prevent firms from earning positive or negative economic profit.
c. a positive profit would induce firms to enter, decreasing price and profit, and a negative profit would induce firms to produce less, decreasing price and profit.
d. firms are price takers, maximizing profit by producing where price equals average cost.
2.) If all firms in a perfectly competitive market are identical, which of the following is NOT a condition for long-run equilibrium in the market?
a. Price is above average cost for all firms.
b. All firms are earning zero economic profits.
c. No firms want to enter or exit the industry.
d. Each firm is maximizing profits.