Homework Answers
Answer
Option 2
are zero
The market has free entry and exit. If the firms are earning profit
in the short run then new firms will enter the market up to
ATC=P
and
If the firms are making losses then some of the firms exit the
market up to P=ATC
Profit =(P-ATC)*Q
P=ATC in the long run so the profit is zero.
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