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Questions: 1) Please give an example of a market that comes close to being considered perfectly...

Questions:

1) Please give an example of a market that comes close to being considered perfectly competitive.

2) What does it mean when firms in a perfectly competitive market earn $0 in economic profits?

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Answer #1

Answer 1: It is very difficult to find out perfectly competitive market. But there are some examples which are close to product homogeneity. Example of such products are:

  • Agricultural product such as commodities like crude oil, wheat, soybeans etc.
  • Gasoline product.
  • Metals

Answer : When in the perfect competitive , the firm is earning $0 economic profit. It means it is a state in which the firm is earning normal profit. The existence of economic profit means that entry of the new firm in the market. But when the firm is entering in the long run scanerio, there is a zero economic profit and entry of the new firm will stop.

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