Answer to Question #210749 in Microeconomics for Rolin Simo

Question

"What is the point of entering a perfectly competitive industry if it is simply to earn zero profits anyway?" Discuss this statement with reference to the long and short run, as well as to heterogeneity across firms. (Max. 1000 words)

Answer 1

During the long run, perfect competition means that economic interests cannot be maintained. The entry of new companies into the market causes the company’s demand curve to shift downward, lowering the median and marginal revenue curves. As a result, in the long run, there will be no economic benefits. 

 It is conceivable that the company is profitable in the short term. 

 When the average income price or cost is greater than the average cost, it is displayed. When the price is lower than the average cost, the company will experience market losses.