Question

A firms have no incentive to enter or exit the industry. Select one: a. market price is equal to minimum long.run average cost. b. each firm earns a normal return. c. both a and c d. all of the above

Answer 1

Answer: The correct answer is "d. all of the above"

Explanation: In a perfectly-competitive industry a firm have no incentive to enter or exit the industry when:

- market price is equal to minimum long-run average cost.

- each firm earns a normal return.

This happens because in perfect competition companies reach a long-term equilibrium where extraordinary benefits are eliminated.