In the diagram below, a firm is operating in an imperfect marketThe firm will only make normal profits in the long-run when

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The question asks about the long-run condition under which a firm operating in an imperfect market will earn normal profits. First, consider the general idea: normal profit in the long run occurs when the price (or average revenue, AR) just covers all costs, including the opportunity costs of the resources used. This implies AR = AC, where AC is the average total cost. In the long run, if AR > AC, firms would earn positive economic profit, attracting new entrants or expansion by existing firms, pushing down price and profits until AR falls back to AC. If AR < AC, firms would incur losses, leading to exit and price/profit adjustments until only normal profits remain. Therefore, the condition AR = AC corresponds to zero economic profit, i.e., normal profit, in the long run for firms in imperfect competition as well. Option analysis (given data): - The provided answer indicates D. AR = AC. This aligns with the standard long-run equilibrium condition: price equals average cost, so the firm earns normal profit rather than supernormal profit. - If alternative options had been available (e.g., AR > AC, AR < AC, or AR = MC, or minimum point of AC, etc.), they would typically be incorrect for the long-run normal-profit criterion. AR > AC would imply positive profit and attract entry, AR < AC would imply losses and exit, and AR = MC describes profit-maximization in the short run rather than the long-run normal-profit condition, which is specifically about AR equaling AC. Note on the diagram: in imperfect competition, long-run adjustments still lead to AR/price converging to AC at the profit-zero point; the presence of downward-sloping AR and MR curves suggests demand facing the firm and the usual distinction between short-run profit maximization (MR = MC) and long-run normal profits (AR = AC). In summary, achieving normal profits in the long run requires the price (AR) to equal average total cost (AC), so the stated correct condition AR = AC is consistent with standard long-run equilibrium in imperfect markets.

In the diagram below, a firm is operating in an imperfect marketThe firm will only make normal profits in the long-run when

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