Question

25. Why will profits for firms in a perfectly competitive industry tend to vanish in the...

25. Why will profits for firms in a perfectly competitive industry tend to vanish in the long run?

26. Why are generic pharmaceuticals significantly cheaper than name brand ones?

Homework Answers

Answer #1

25) In perfect competition, all firms sells homogenous product and there is free entry and exit. Also it assumes perfect knowledge.

when firm earns profit in short run then other firm will see and will enter in the industry which will increase the supply of the goods, lowering prices and profit. There will be entry of new firms until all positive profit vanishes. Thus in long run, all firms produces at a point where P=min of AC I.e. All firms earn mormal profit in 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
Why will profits for firms in a perfectly competitive industry tend to vanish in the long...
Why will profits for firms in a perfectly competitive industry tend to vanish in the long run?
The following statements describe why profits for firms in a perfectly competitive industry tend to vanish...
The following statements describe why profits for firms in a perfectly competitive industry tend to vanish in the long run. Select the explanation that most accurately reflects this scenario? A) Firms try to increase supply to cover their costs if they experience losses, and this leads to zero profits. B) Firms are unable to generate revenue over time because the demand for products drops. C) When other perfectly competitive firms see an opportunity to earn profits and enter the market...
If all firms in a perfectly competitive industry earn zero economic profits, in the long run,...
If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the: Select one: a. industry supply curve will shift to the right. b. number of firms in the industry will decrease. c. number of firms in the industry will increase. d. industry supply curve will not shift.
Compare the short run and long run for perfectly competitive firms. How do perfectly competitive firms...
Compare the short run and long run for perfectly competitive firms. How do perfectly competitive firms adapt to market changes in the short run? What can perfectly competitive firms expect in the long run in terms of profits?
Explain why abnormal profits earned and losses incurred by perfectly competitive, profit-maximizing firms cannot be present...
Explain why abnormal profits earned and losses incurred by perfectly competitive, profit-maximizing firms cannot be present at long-run equilibrium.
Which of the following explains why profits are zero in the long-run for perfectly competitive firms?...
Which of the following explains why profits are zero in the long-run for perfectly competitive firms?                         a) since firms allowed to enter and exit the market, firms earning negative profits will leave the market,                         while new firms enter the market to take up the positive profits                         b) since firms all produce the same good, they must have the same cost so they all earn zero profits                         c) firms cannot raise price so it is not possible...
Explain your reasoning and write legibly a. Why are perfectly competitive firms price-takers? Choose one industry...
Explain your reasoning and write legibly a. Why are perfectly competitive firms price-takers? Choose one industry that is likely to be perfectly competitive and describe why. Which of the characteristics of perfect competition do you find to be least realistic and why? b. For the industry that you chose in part A, draw the long run equilibrium graph for the global market and for an individual producer and explain the two ways that these graphs are connected. Why is the...
If firms in a perfectly competitive industry are making zero economic profit, then a some of...
If firms in a perfectly competitive industry are making zero economic profit, then a some of those firms will leave the industry because firms cannot persistently go without making economic profit. b new firms will enter the industry, because the new entrants would be ensured of doing as well as in their best foregone alternative. c there is no incentive for either entry or exit. d some of the firms will temporarily shut down. e The supply curve shifts to...
Explain why in the long run, perfectly competitive firms will make no profit. What is the...
Explain why in the long run, perfectly competitive firms will make no profit. What is the long run equilibrium condition for a firm? ( first assume firm are making positive profits and then assume some firms are making negative profits... graphs).
Which firms typically have zero economic profits in the long run? options: A) monopolist, perfectly competitive...
Which firms typically have zero economic profits in the long run? options: A) monopolist, perfectly competitive B) perfectly competitive, monopolistically competitive C) oligopolist, monopolistically competitive D) perfectly competitive, oligopolist
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT