Question

When a perfectly competitive industry is not in the long-run equilibrium, all firms in the industry A. earn negative economic profits. B. may earn negative or positive economic profits C. earn positive economic profits. D. earn zero economic profits.

Answer 1

Answer:

The correct answer is the option C: earn positive economic profits.

Explanation:

In microeconomics, all the companies in a perfectly competitive industry at the short-run might earn positive economic profits due to the fact that at short-term many companies might leave the industry in the case that they do not earn normal profits and that causes that the companies that stay will earn positive economic profit. In addition to that, at the long-run more companies will enter the industry and therefore all the firms might earn zero economic profit that is equal to normal economic profit.