Answer to Question #113696 in Economics of Enterprise for rio

Question

Why is it not possible for a perfectly competitive firm to make supernormal profits in the long run?

Answer 1

It is not possible for any firm to make supernormal profit in a perfectly competitive economy. Supernormal profit is when the total revenue of the firm is greater then the total cost. in long run every firm makes normal profit. This is as a result of having perfect information in the long run economy. This makes it different since firms are using same information. Another factor is using the same conditions in the business meaning you cannot outdo your competitor.