One difference between the short run and the long run is that perfectly competitive firms: A. always earn more economic profit in the long run. B. always earn positive economic profit in the short run, but never in the long run. C. can earn positive, negative, or zero economic profit in the short run, but will earn zero economic profit in the long run. D. earn zero economic profit in the short run, but will earn positive economic profit in the long run.

Question

Business

Felicity Dickerson

9 October, 18:47

One difference between the short run and the long run is that perfectly competitive firms: A. always earn more economic profit in the long run. B. always earn positive economic profit in the short run, but never in the long run. C. can earn positive, negative, or zero economic profit in the short run, but will earn zero economic profit in the long run. D. earn zero economic profit in the short run, but will earn positive economic profit in the long run.

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Answers (1)

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Stella · Answer 1

Answer: The correct answer is "C. can earn positive, negative, or zero economic profit in the short run, but will earn zero economic profit in the long run".

Explanation:

In perfect competition we have a dynamic economy with technology and changing consumer tastes, we will always have some competitive industries with economic benefit and others with economic losses, as adjustments are made.

The economic benefits are forced to zero because companies enter without barriers to entry into the industry.

Losses are eliminated due to companies that leave the industry to obtain at least a normal profit elsewhere and Resources are reallocated, from industries that have losses, to industries that have economic benefits.

Therefore, in the short term it is possible for companies to obtain extraordinary benefits, while in the long term the entry and exit of companies eliminates these exceptional benefits.