Why does a firm under perfect competition continue to operate in the long run despite earning only normal/zero profits ?
The opportunity cost of the self- owned factors is already being recovered by the firm in the long run
The opportunity cost of the self- owned factors is already being recovered by the firm in the long run option is correct.
In perfect competition, long-run equilibrium occurs where price equals the minimum of the long-run average cost curve, so each firm earns only normal or zero economic profit. Normal profit is not zero total earnings — it is defined as the return that just covers the opportunity cost of every factor supplied by the entrepreneur, including own labour, own land and own capital.
Because these implicit costs are already embedded in the LAC curve, a firm at P = min LAC is fully compensating itself for what it could have earned in its next-best occupation. There is no incentive to exit and no super-normal reward to attract entry, so the industry rests in long-run equilibrium.
The distractors are technically true side-consequences of long-run competitive equilibrium (min-LAC operation implies productive efficiency and identical cost conditions across firms) but they do not answer why the firm continues to operate — the survival motive is the recovery of the entrepreneur’s own opportunity cost.
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