Describe how, in the long-run, an increase in the demand for a perfectly competitive firm’s product...
Describe how, in the long-run, an increase in the demand for a perfectly competitive firm’s product can lead to entry of new firms.
Homework Answers
Perfect competition in the market where there are large number of buyers and sellers in the market
there are no barriers to entry and exit in the market
price is decided only by the market forces that is demand and supply
so as there is no bad no barrier to entry it means the new firms can get it easily into into the market and in the long run they can exit any time as well
this will lead to normal profit for every firm in the market
the normal profit is also called zero economic profit
As there is increase in demand there will be more supply due to large number of firms in the market and supply will exceed the demand
this will lead to end up with zero economic profit
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Describe how, in the long-run, an increase in the demand for a
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