In perfect competition, long-run equilibrium occurs when the economic profit is:

• A. zero
• B. negative
• C. maximized
• D. positive

Answer: (A)

Verified step by step guidance

1. Understand the concept of long-run equilibrium in perfect competition: it is the point where firms have no incentive to enter or exit the market because economic profits are stable.
2. Recall that economic profit is total revenue minus total costs, including both explicit and implicit costs.
3. In the long run, if firms are making positive economic profits, new firms will enter the market, increasing supply and driving down prices.
4. If firms are making negative economic profits, some firms will exit the market, decreasing supply and driving up prices.
5. Therefore, long-run equilibrium occurs when economic profit is zero, meaning firms earn just enough to cover all their costs, including opportunity costs, and no new firms enter or exit.