Question

A producer would decide to produce in a competitive market in which she will earn zero profit in the long run because

A. in the short run her profit is positive.
B. the zero profit in the long run is, in fact, zero accounting profit, and only matters on the books.
C. the producer has a high cost of exiting this market, and counting that cost, it’s better for her to continue operating at zero profit.
D. at zero profit, her revenue will cover all her costs, both explicit and implicit (opportunity cost).

Answer 1

D. at zero profit, her revenue will cover all her costs, both explicit and implicit (opportunity cost).

Answer 2

D. at zero profit, her revenue will cover all her costs, both explicit and implicit (opportunity cost).

Step-by-step explanation:

We should understand that there are accounting profit and economic profit.

Accounting profit will represent the revenues and expenxes of the activity.

while economic profit will add the opportunity cost (earnings from other alternatives to the factors) So at an ecnomic profit of zero the producer is in the best possible spot as none other activity will provide better yield.