Long-term equilibrium of an industry under a perfectly market conditions is achieved when ________.
Long-term equilibrium of an industry under a perfectly market conditions is achieved when ________.
The correct option is C all of the above
Under perfect competition,
there is freedom of entry and exit of firms. Therefore, when there is
super-normal profits in the market the new firms tend to enter the market to
get the benefit of such profits due to which the supply of the commodity is
increased and price falls and when there is super-normal loss in the market the new firms tend to exit
the market to avoid such losses due to which the supply of the commodity is
decreased and price increases respectively.
Due to these entry and exit mechanism, the firms in
the market only earn normal profits in the long run where there is no further entry and exit of new firms from the industry and every firm in the industry is in equilibrium.
Under perfect competition, there is freedom of entry and exit of firms. Therefore, when there is super-normal profits in the market the new firms tend to enter the market to get the benefit of such profits due to which the supply of the commodity is increased and price falls and when there is super-normal loss in the market the new firms tend to exit the market to avoid such losses due to which the supply of the commodity is decreased and price increases respectively.
Due to these entry and exit mechanism, the firms in the market only earn normal profits in the long run where there is no further entry and exit of new firms from the industry and every firm in the industry is in equilibrium.
