Answer to Question #75979 in Economics for richard

Question

explain using properly labelled diagrams, why a perfectly competitive firm will earn only normal profit in the long-run.

Answer 1

Firms can only make normal profits in the long run, although they can make abnormal (super-normal) profits in the short run. It is because in the long run the number of firms is such that P = MR = MC = LATC and LATC is a its minimum.