Question

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

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

Homework Answers

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.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider perfect competition, briefly explain whether it is possible for firms in a perfectly competitive market...
Consider perfect competition, briefly explain whether it is possible for firms in a perfectly competitive market to earn zero economic profit even if they have incurred a sunk cost upon entry into the market. Given an example of such a cost.
Our model predicts that firms in a perfectly competitive market will earn zero economic profit in...
Our model predicts that firms in a perfectly competitive market will earn zero economic profit in the long run, yet continue to produce the socially optimal quantity. Why would a firm continue to produce a product that it earns no profit on?
If a perfectly competitive seller is maximizing profit and is making zero economic profit, which of...
If a perfectly competitive seller is maximizing profit and is making zero economic profit, which of the following will this seller do? increase production in order to make an economic profit remain open but decrease production in order to make an economic profit go to work in the next-best earning opportunity shut down, with a loss equal to total fixed cost continue at the current output, making zero economic profit
explain in detail how a perfectly competitive firm and market can begin with short-run economic profit...
explain in detail how a perfectly competitive firm and market can begin with short-run economic profit and then move to a position of long-run equilibrium.
In the short run, if firms in a perfectly competitive market are experiencing economic loss, then...
In the short run, if firms in a perfectly competitive market are experiencing economic loss, then in the long run, firms will _____ the market and economic profits will _____. enter, decrease enter, increase exit, decrease exit, increase
Assume the apple industry is a perfectly competitive and all firms in the market are currently...
Assume the apple industry is a perfectly competitive and all firms in the market are currently earning a zero-economic profit. A scientific study comes out that says that an apple a day increases your risk of cancer. (4 pts.) Will this cause the market price of apples to increase, decrease, or remain the same? In the short-run, will this cause the profit for the firms currently in the market to increase, decrease, or remain the same? In the long-run, will...
When economic profit is ____, the firm will ____. a. positive; face new competition b. positive;...
When economic profit is ____, the firm will ____. a. positive; face new competition b. positive; enjoy large economic profits for a long time c. negative; cease to exist d. negative; face new competition e. zero; go out of business
2. If perfectly competitive firms earn economic profit in the short run, then we would expect...
2. If perfectly competitive firms earn economic profit in the short run, then we would expect that in the long run Multiple Choice supply will decrease. existing firms will leave the market demand will decrease. new firms will enter the market. 3. Which of the following is consistent with a perfectly or monopolistically competitive market? Multiple Choice marginal revenue lower than price for each firm exit of small firms when profits are high for large firms a small number of...
If economic profits are currently being earned by firms in a perfectly competitive market, in the...
If economic profits are currently being earned by firms in a perfectly competitive market, in the long run we can expect: Group of answer choices new firms to enter the business the market supply curve to shift to the left the market price to rise a substantial economic profit to be earned by firms
If economic profits are currently being earned by firms in a perfectly competitive market, in the...
If economic profits are currently being earned by firms in a perfectly competitive market, in the long run we can expect: Group of answer choices new firms to enter the business the market supply curve to shift to the left the market price to rise a substantial economic profit to be earned by firms
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT