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प्रश्न
Why can a firm not earn abnormal profits under perfect competition in the long run? Explain.
उत्तर
Under perfect competition, no firm can earn abnormal profits in the long run. This is because if any firm in the long run earns abnormal profits (that is price > minimum of average cost curve), then new firms are attracted into the market. Due to the new entrants, the production of output increases, which then increases the supply of the output. This puts pressure on the price and price continues to fall, until it reaches the minimum of average cost curve. At the minimum of average cost curve, all the abnormal profits are wiped-out and no firm earns abnormal profit. Thus, in long run, under perfect competition, no firm can earn abnormal profits, rather earns zero economic profit.
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संबंधित प्रश्न
Explain ‘large number of buyers and sellers' features of a perfectly competitive market.
What is a price taker firm?
Under what market condition does Average Revenue always equal Marginal Revenue? Explain.
There are no barriers in the way of firms leaving or joining industry in a perfectly competitive market. Explain the significance of this feature.
Under which market form is a firm a price taker?
In which market form can a firm not influence the price of the product?
What are the characteristics of a perfectly competitive market?
How is the optimal amount of labour determined in a perfectly competitive market?
Show with the help of a diagram, how a perfectly competitive firm earns a normal profit in short-run equilibrium.
Answer the following question.
Is a firm under perfect competition a price taker, or a price maker? Justify your answer.
Identify the market form and explain the corresponding feature, as given in the following statement:
"The commodity in this market has attributes which are identical for sellers and buyers."
Choose the correct answer from given options
A firm is not a price maker under
Under Perfect Competition, a firm will enjoy normal profit in the long run even if it enjoys supernormal profit in the short run. Explain.
Explain the short-run equilibrium of a firm facing losses under Perfect Competition.
How is Total Revenue under perfect competition different from Total Revenue under imperfect competition? Give two points to show the difference.
A perfectly competitive firm always enjoys normal profit in the long run, irrespective of the situation it faces in the short run. Discuss the statement in brief.
