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Answer to Question #51669 in Other Economics for Nicoleta

Question #51669
Question continued...........

d) As this is perfect competition, new firms may enter the market and compete these profits away. What therefore will ensure that only normal profits are made?

e) The answer to part d) should be the same as the answer to c (4), why?
Expert's answer
Question continued...
d) As this is perfect competition, new firms may enter the market and compete these profits away. The more firms enter the market, the lower profits they receive, until in the long run P = ATC and ATC are minimized, this will ensure that only normal profits are made.
e) The answer to part d) should be the same as the answer to c.

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