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:

Option 1 -> Starts with (A), but incorrectly places (B) before (D), meaning profits increase before firms exit, which is illogical.

Option 2 -> Places (C) before (B), suggesting firms stop leaving before profits increase to normal level, which is incorrect.

Option 3 -> (A) Firms earn less than normal profit → (D) Some firms exit, price increases → (B) Profits increase to normal level → (C) No more firms leave. This is the correct logical sequence.

Option 4 -> Starts with (C), suggesting equilibrium exists first, which contradicts the adjustment process.

Hence, Option 3: (A), (D), (B), (C) -> In perfect competition's long-run adjustment, when firms earn subnormal profits (A), losses trigger firm exit (D). As firms leave, market supply decreases, causing price to rise. This price increase allows remaining firms' profits to rise to normal profit level (B). Once normal profits are achieved, the exit process stops as no firm has incentive to leave (C), establishing long-run equilibrium. -> correct