A Price-Taker Market Tends Toward a State of Long-Run Equilibrium

Multiple Choice

A price-taker market tends toward a state of long-run equilibrium in which firms earn only a normal rate of return (zero economic profits) because

A) firms will keep their prices low under fear of government regulation.
B) with firms able to enter and leave the industry freely, competition will drive prices down to the level of production costs.
C) by definition, production costs always rise to equal the market price.
D) mismanagement on the part of owners generally results in the firms not equating marginal revenue and marginal cost.