Identify the correct sequence due to which firms under perfect competition earn normal profits in the long run.

(A) The firms are earning less than normal profit at the prevailing price.
(B) The profits of each firm will increase to the level of normal profit.
(C) No more firm will want to leave, since they will be earning normal profit here.
(D) Some firms will exit, which will lead to an increase in price.

Choose the correct answer from the options given below:

(A), (D), (B), (C)

The correct answer is Option (3) → (A), (D), (B), (C)

• (A) The firms are earning less than normal profit at the prevailing price. → This means the market price is too low, and firms are incurring losses.

• (D) Some firms will exit, which will lead to an increase in price. → Exit of firms reduces market supply, raising the market price.

• (B) The profits of each firm will increase to the level of normal profit. → As price rises, remaining firms’ profits improve until only normal profits are earned.

• (C) No more firm will want to leave, since they will be earning normal profit here. → Market reaches long-run equilibrium where all firms earn normal profit.