GENERAL KNOWLEDGE

Detailed explanation-1: -In perfect competition the firms earn normal profits in long run, and not the supernormal profits as the free entry and exit of firms is a feature of the perfectly competitive market.

Detailed explanation-2: -Firms in a perfectly competitive world earn zero profit in the long-run. While firms can earn accounting profits in the long-run, they cannot earn economic profits.

Detailed explanation-3: -There are no economic profits in a perfectly competitive market in the long run because eventually the drivers of profits cease to exist.

Detailed explanation-4: -This is because, although in the short run, one firm may create a technical advantage and reduce it’s costs (creating supernormal profit), in the long run, because of the perfect information, every single firm will be able to copy the first firm and everyone’s total costs will fall but will be the same as eachother’s.