In a competitive market, if a firm achieves normal profit, what does this indicate about its long-term viability and market dynamics?

When a firm achieves normal profit in a competitive market, it means that the company is covering all of its costs, including both fixed and variable expenses, but is not making extra money beyond that. This is important because it indicates that the firm is sustainable in the long run; it can continue to operate without losing money. For example, if a bakery sells enough bread to pay for ingredients, rent, and wages, but does not make additional profit, it is still viable as long as it can keep its costs covered. In a competitive market, when firms earn normal profit, it suggests that supply and demand are balanced, and no firm has a significant advantage over others. This balance keeps the market dynamic, as firms will enter or exit based on their ability to earn more than normal profit.