In a perfectly competitive market, which of the following statements is true regarding economic profits in the long run?

In a perfectly competitive market, firms can only earn normal profits in the long run, meaning they make just enough to cover their costs, including a fair return on their investment. This happens because if firms are making economic profits, new firms will be attracted to the market, increasing supply and driving prices down. Conversely, if firms are making losses, some will leave the market, decreasing supply and pushing prices back up. For example, if a bakery is making extra profits, new bakers will open shops, which will increase the number of baked goods available and lower the price until profits are normal again. Therefore, in the long run, economic profits tend to zero in a perfectly competitive market.