Question

Under ________ market condition, firms in the industry make only normal profit in the long run.

• A. perfect competition
• B. monopoly
• C. oligopoly
• D. all of above

Answer 1

The correct option is A perfect competition

Perfect competition is a type of market where there are huge number of buyers and sellers who deals in the same type 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.