Firms in perfect competition can only make profits in the short run because

Question

BlackTom AI · Accepted Answer

Perfect competition assumes free entry and exit, identical products, many price-taking firms, and firms choose output where P = MR = MC.

Relevant knowledge points:
- Economic profit per unit = P − ATC; total economic profit = (P − ATC) × Q.
- In the short run firms may have P > ATC (positive economic profit) because fixed inputs cannot adjust.
- In the long run free entry and exit drives economic profit to zero: P → min ATC so firms earn only normal (zero economic) profit.

Step-by-step reasoning:
1. Suppose in the short run a representative firm produces Q* where P = MR = MC and P > ATC at that Q*. Then profit per unit = P − ATC > 0, so total profit = (P − ATC) × Q* > 0.
2. These positive economic profits attract new firms because there are no barriers to entry in perfect competition. Each entrant adds supply to the market.
3. Market supply shifts right, increasing total quantity offered at each price. With downward-sloping demand, the market price falls.
4. As price falls, individual firms face a lower P and adjust output to the new P = MC rule. The falling price reduces (P − ATC) toward zero.
5. Entry continues until P = min ATC, at which point P − ATC = 0 and economic profits are zero. Thus long-run equilibrium yields zero economic profit.

Why the correct answer is correct:
- Choice c states that new firms enter in the long run, bringing prices down — exactly the mechanism above that eliminates short-run economic profits under perfect competition.

Why the other options are incorrect:
- a is false because perfect competition assumes low/no barriers to entry, not high barriers.
- b is false because products are homogeneous (not highly differentiated), so differentiation is not the reason profits vanish.
- d is irrelevant: opportunity costs don’t prevent long-run entry and the erosion of economic profits under free entry.

Conclusion: therefore the correct answer is c.

Firms in perfect competition can only make profits in the short run because单项选择题

类似问题

Firms in perfect competition can only make profits in the short run because

A perfectly competitive firm is faced with a horizontal, perfectly elastic demand curve because

完全竞争市场中的企业只能在短期内盈利，因为

从长远来看，完全竞争市场中的企业能获得多少经济利润？

In the long-run, how much economic profit do firms in perfectly competitive markets make?

True or False: Firms in perfect competition have the power to set their own price.

How do firms in perfect competition determine their price and level of output?

What type of demand curve do firms in perfect competition face?

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单