Question

Positive economic profit in a perfectly competitive market will increase market competition. Discuss

Answer 1

The perfect competitive industry haven much firm sand many buyers and the price is given by the market equilibrium where demand equal to supply, the market have free entry and identical product where anyone can produce the same identical goods.

Now, if the market is earning the economic profit then the new firm will enter the market because the profit attracts the new firms and the increasing firm s in the market increases competition in the market because of more firms more competition which decreases the price equal to minimum average cost in the long run.