Question

In perfect competition, in the long run, ____________.

• A. there are large profits for the firm.
• B. there are large losses for the firm.
• C. there is normal profit for the firm
• D. there are negligible profits for the firm.

Answer 1

The correct option is C there is normal profit for the firm

Perfect competition is a type of market where there are large number of buyers and sellers who deals in homogeneous of product due to which no individual unit is able to influence the price of the product.

Under perfect competition, there is freedom of entry and exit of firms. Therefore, when there is super-normal profits or losses the firms in the market enter and exit respectively due to which the firms in the industry only earn normal profits in the long run.