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Homework answers / question archive / Which of the following statements is correct regarding the perfectly competitive industry? [1] In the long run, firms' economic profit can take any value
Which of the following statements is correct regarding the perfectly competitive industry? [1] In the long run, firms' economic profit can take any value. [2] Firms will always make positive economic profit in the long run, unlike in the short run. A firm making zero economic profit is essentially covering all the opportunity costs of production. [4] Due to free entry and exit, the level of production efficiency for a firm is greater in the short run than in the long run. [5] Firms face the same equilibrium quantity in the short run and long run since price is the same in both time periods.
Under perfect competition, both allocative and productive efficiency are achieved in the long run.
In the long run, firm's economic profit will be zero as MC = AC = P. So, Option (1) and (2) Are not correct
The production efficiency remains same in short run and in long run. It is independent of number of firms that enter or exit the industry. Option (4) is not correct
Price is different in short run and the long run. In short run, P = MC while in the long run, P = minimum AC.
Option (5) is not correct
All the opportunity cost will be covered at a point where firm makes 0 economic profit and there is no scope for the deadweight loss. This efficiency is achieved under perfect competition;
Hence, Option (3) is the correct choice
