Firms in perfect competition break even in the long-run because

Step 1: Analyze the question The question asks why firms in perfect competition only earn normal profit (break even, where AR = AC) in the long run.

Step 2: The concept Perfect competition has free entry and exit. This is the key feature behind the long-run result:

1. In the short run, a firm may earn abnormal (supernormal) profit.
2. These attractive profits draw new firms into the industry.
3. More firms mean market supply increases, so the market price falls.
4. Price keeps falling until AR = AC, so abnormal profit disappears and only normal profit remains.
5. At this point the firm breaks even and there is no more incentive for new firms to enter.

Step 3: Check each option

• A. Wrong. Perfect competition has no barriers to entry. Copyright laws that block entry describe a monopoly, not perfect competition.
• B. Correct. Attractive profits draw in new firms. This increases supply and lowers price until profits fall to the normal level, so firms break even.
• C. Wrong. If MR were greater than MC at all levels, the firm would keep expanding output and would not be at equilibrium. Profit maximization requires MR = MC.
• D. Wrong. Loan repayment has nothing to do with the economic theory of long-run equilibrium.

Step 4: Answer The correct option is B.

Exam tip: Remember the chain "Profit → Entry → Supply ↑ → Price ↓ → Normal profit." In perfect competition, whenever you see "long run," think of free entry and exit pushing profit to normal (AR = AC = MR = MC at equilibrium).