Given below are two statements: One is labelled as Assertion A and the other is labelled as Reason R.
Assertion (A): Every perfectly competitive firm in the long run earns normal profits only.
Reason (R): Market price gets fully adjusted, due to changes in the demand and the supply condition and the resultant free entry and exit of the firms in the perfectly competitive market, so as only the normal profit persists.
In the light of the above statements, choose the most appropriate answer from the option given below:

Correct option is A

Assertion is correct as in perfect competition firm when a firm earns economic profits in the short run, it attracts new entrants into the market who want to take advantage of the opportunity to earn profits.
As more firms enter the market, the supply of goods or services increases, causing the price to decrease. This decrease in price reduces the profits of all firms in the market until they are only earning normal profits.
Reason is also correct explanation of assertion. Each firm in the industry has to sell its product at a price that is determined by the market price and market supply. If a firm wants to sell below equilibrium price then they have to bear the loss similarly a firm cannot charge higher price as other firms are selling at equilibrium level. Hence a firm can only earn normal profit in long run.