Perfect Competition

Question 1

What do firms make in the SR? Perfect comp

Answer 1

Abnormal profits or abnormal losses

Question 2

What do firms make in the long run? Perfect comp

Answer 2

Make normal profit where ac = ar

Question 3

Why are firms productively efficient in perfect competition

Answer 3

Producing at bottom of ac curve - incentive to produce more and of a higher value than competitors- build consumer loyalty - non price factors

Question 4

The downside of perfect competition - think lack of snp

Answer 4

Dynamically inefficient - little profit in long run lack of investment back into the business