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A firm in a perfectly competitive market is making profits. a. is this the short run...

A firm in a perfectly competitive market is making profits. a. is this the short run or the long run? b. what is likely to happen in the market and to this firm as time goes by?

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Answer #1

a. is this the short run or the long run?

No.

It is a short run firm.

A long run firm makes zero economic profit in a perfectly competitive market, and the given firm is making a profit; it means the firm is in the short run.

b. what is likely to happen in the market and to this firm as time goes by?

The profit will attract new firms in the market up to there is a zero economic profit for all. The market supply will increase and shifts to the right which will decrease price and decrease profit for all.

The firm is a price taker, so the profit for the given firm, in the long run, is zero.

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