ECONOMICS
PROFIT
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Yes, I understand this from the notes
|
|
|
No, I don’t understand this from the notes
|
|
|
No, I don’t understand this, as I have not read the notes
|
|
|
None of the above
|
Detailed explanation-1: -Perfect competition in the long-run In perfect competition, there is freedom of entry and exit. If the industry was making supernormal profit, then new firms would enter the market until normal profits were made. This is why normal profits will be made in the long run.
Detailed explanation-2: -All firms in a perfectly competitive market earn normal profit in the long run.
Detailed explanation-3: -Normal profit occurs when economic profit is zero, or when the total revenue of a company equals the sum of implicit cost and explicit cost. It is the point where the business utilizes all the available resources efficiently, and the compensation is higher than the opportunity cost lost to produce the product.
Detailed explanation-4: -Firms in a perfectly competitive world earn zero profit in the long-run. While firms can earn accounting profits in the long-run, they cannot earn economic profits.