What is the long-run equilibrium for a firm?

The long-run equilibrium for a firm is characterized by the point where firms are making zero economic profit. This situation occurs in a perfectly competitive market where, in the long run, firms enter or exit the market based on their profit levels.

When firms are earning economic profits, new firms are attracted to the industry, driving the supply curve to the right, which causes prices to decrease until profits are eliminated. Conversely, if firms are incurring losses, some firms will exit the market, which decreases supply and increases prices, again moving the market towards a situation where only normal profits (zero economic profit) are made.

In this equilibrium state, resources are allocated efficiently since firms produce at a level where price equals marginal cost, and there is no incentive for firms to either enter or exit the market. Therefore, the correct answer reflects the long-run condition where firms earn zero economic profit, ensuring that their total revenue exactly covers their total costs, including normal profit.