Suppose That a Firm Is Earning a 12% Return on Capital

Multiple Choice

Suppose that a firm is earning a 12% return on capital in a perfectly competitive industry, and the market return outside the industry is 9.5%. Which of the following statements is (are) TRUE?

A) In the short run, the firm is making a below-market return of 2.5%.
B) In the short run, the firm is making a negative return on capital of 2.5%.
C) In the long run, the firm's return on capital will be 0%.
D) In the long run, the firm's return on capital will be 9.5%.