Question

In: Economics

Is there profit to be made in Perfect Competition? What kind?

Is there profit to be made in Perfect Competition? What kind?

Solutions

Expert Solution

Yes, there is a profit situation in the perfect competition because perfect competition market is that market situation where there are a large number of buyers and sellers are existing and all the sellers are selling the homogeneous commodity at a constant price so here the profit situation is normal profit both in the short run and in the long run because if any seller tries to charge a high price in the market then it is very difficult to survive in the market because all the sellers are selling at the constant price and consumer have lots of choices therefore in that particular situation no consumer is bound to purchase the commodity only from one seller, therefore, the consumer easily shift from one seller to another seller to purchase the commodity this is the only reason why demand curve is perfectly elastic in the perfect competition and in both the cases whether it is a short-run period or long run period forms are able to earn and only normal profit.


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