Answer to Question #125426 in Economics of Enterprise for Muhammad Yousaf

Question

a) Describe the factors that drive profits to zero in perfectly competitive markets in the long run. Explain carefully the incentives that drive the market to a long run equilibrium.

b) Why would a firm choose to operate at a loss in the short run? Explain carefully.

c) When do firms decide to shut down production in the short run? Explain carefully.

Answer 1

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