Question

a.Excess/abnormal profits play an important role in perfect competition. Explain.

b. Why might average total costs initially decrease in the short-run?

c. Should qualified accountants wash their own cars?

Answer 1

A) True excess or supernormal profit plays the crucial role in the short run perfect competation because of the number of the firm, in the long run, depends on these factors example if the firm makes the supernormal profit in short run this attract another firm in long run another hand firm making normal profit long run other firm will not enter the market.

B) Due to economies of the scale operation of the individual firm due to more productivity of the factors of the production enjoys reducing the cost of the production hence firm enjoys ATC decreasing the cost.

C) It depends on the nature of the work if washing car easy work person can wash if the job is difficulties it done by the other person's example service center employees.