Why can a firm not earn abnormal profits under perfect competition in the long run? Explain.
Why can a firm not earn abnormal profits under perfect competition in the long run? Explain.
4 views
1 Answers
Under perfect competition, there is freedom of entry to firms into industry. When there are abnormal profits, new Firms will enter. This will increase supply and price will fall. This process will continue till abnormal profits are wiped out.
4 views
Answered