Question

What can be wrong about a perfectly competitive equilibrium?

Answer 1

Intermarket segmentation refers to the formation of consumer segments with similar needs and buying behaviour, although located in different countries. It is the process of selecting consumer segments across a range of countries that are targeted with an integrated brand positioning strategy regardless of geographical or national boundaries.

An abstract theoretical construction used by economists is the "perfectly competitive market." It serves as a benchmark for comparing existing real-market competition. Companies can only experience short-term profits or losses under perfect competition. In the long run, an infinite number of firms producing infinitely divisible, homogeneous products eliminate profits and losses. Companies experience no entry barriers, and perfect information is available to all consumers. In other words, during perfect competition, all possible causes of long-run profits are assumed away.

Economists and accountants differentiate between normal profits and profits. Normal profit is defined as less revenue, explicit as well as implicit expenses. In other words, normal profit allows businesses to make just enough over cost, so their opportunity costs are compensated.

An economic profit over normal profits is anything earned. In long-run equilibrium, there can be no economic profits, but in the long run, all firms earn normal profits. Some textbooks refer to "super-normal profit" as economic profit.