What does it indicate when markets are in "long-run equilibrium"?

When markets are in "long-run equilibrium," it signifies that firms are making normal profits, which means they are covering all their costs, including opportunity costs, but are not generating supernormal profits. In this state, no economic profits exist that would incentivize new firms to enter the market or current firms to exit.

Normal profits indicate that firms are able to sustain themselves in the market without the allure of excessive profits prompting new competition. The constant entry and exit of firms is a hallmark of competitive markets; when firms experience losses, some exit, reducing supply until prices rise and the remaining firms can cover their costs, while when firms are making supernormal profits, new firms enter, driving prices down until profits normalize.

Therefore, this situation reflects a balance where the market forces of supply and demand have adjusted, ensuring that resources are allocated efficiently, and firms can sustain themselves without the threat of bankruptcy or the motivation to expand unnecessarily.