In a perfectly competitive market, if a firm is earning normal profit, which of the following statements is true regarding supply and demand dynamics, business sustainability, and competitive advantage?

In a perfectly competitive market, when a firm is earning normal profit, it means that the firm is covering all its costs, including the opportunity costs of using its resources. This situation indicates that the supply and demand dynamics are balanced; the quantity of goods supplied by the firm matches the quantity demanded by consumers. Since the firm is not making supernormal profits, there is no strong incentive for new firms to enter the market, which helps sustain the existing businesses. An example of this would be a local bakery that sells enough bread to cover its costs but isn’t making extra money beyond that; it can continue operating because it meets its financial needs. Overall, normal profit suggests stability in the market, where firms can survive without gaining a competitive edge over others.