Perfect Competition

Question 1

What is supernormal profit

Answer 1

Surplus return above the normal profit

Question 2

What is normal profit

Answer 2

Minimum level of profit to remain in the industry

Question 3

What is subnormal profit

Answer 3

Any profit less than normal profit

Question 4

What assumptions are made for perfect competition

Answer 4

1. Price takers as many buyers and sellers
2. Low barriers to entry
3. Perfect information
4. No firm large enough to affect market price
5. Homogenous products
6. Freedom to leave and enter the market
7. equal access to technology