McqMate
| Q. |
In the long-run equilibrium, a competitive firm earns - |
| A. | Super-normal profit |
| B. | Profits equal to other firms |
| C. | Normal profit |
| D. | No profit |
| Answer» C. Normal profit | |
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Explanation: Making the assumption that the market demand curve remains unchanged, higher market supply will reduce the equilibrium market price until the price = long run average cost. At this point each firm is making normal profits only. There is no further incentive for movement of firms in and out of the industry and a long-run equilibrium has been established. |
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