why competitive firms stay in business if they make zero profit?

Q: use relevant diagrams as well as microeconomic theory, discuss why competitive firms stay in…

A: In the long run, a firm in a perfectly competitive market will only make a normal profit(zero…

Q: Strictly speaking, pure competition has never existed and probably never will. Then why study it?

A: ANS Pure competition is the form of market where there are many sellers & many buyers and the…

Q: What is then the use or relevance of the purely competitive model?

A: Pure competition is a market system in which multiple firms compete for the same clients. The best…

Q: What two lines determine whether a firm is making positive or negative or zero profits?

A: Introduction The perfect competitive firm only needs to decide on one thing: how much to make. To…

Q: Why can't firms enter the market in the short-run?

A: There are various types of market structures which have different characteristics of the number of…

Q: Assume firms decide to enter the market, how will this affect market price and quantity in the long…

A: In a market with perfect competition, every manufacturer offers the same products or services. There…

Q: What is the relationship between economies of scale and the level of market competition?

A: Economies of scale help more than just the company that produces the goods. Consumers will benefit…

Q: How is non-price competition different from price competition?

A: There are two ways producers can compete (with their aim being profit maximization). They are: Price…

Q: Why would a firm that incurs losses choose to produce rather than shut down

A: Shut down point refers to the point where the firm stops its production process. It is the point…

Q: All buyers in a perfectly competitive market set prices to compete in their market? is it true or…

A: Marginal cost is the additional cost incurred in order to produce an additional unit of output.

Q: What happens when a perfectly competitive market is in equilibrium?

A: A perfectly competitive market is a market structure in which there are many buyers and sellers. The…

Q: based on four market structure in economics, why some firms able to continue to make an economic…

A: Meaning of Market: The term market refers to the situation under which the producers or the…

Q: You observed that in the long run, a profit-maximizing firm chose to exit a market. What can you…

A: There is a difference between the cost function in the short-run and in the long-run due to which…

Q: When will a firm neither enter or exit a competitive market?

A: In competitive market firms are free to enter and exit.

Q: WHY SOME FIRMS MIGHT BE ABLE TO CONTINUE TO MAKE AN ACONOMIC PROFIT IN THE LONG RUN?

A: A monopoly occurs when a single person or corporation serves as the exclusive supply of a certain…

Q: Who said “The customer experience is the next competitive battleground” ?

A: Customer experience refers to the perception of a business by the customers. It is formed when a…

Q: Explain how economics make profit or loss when firms are perfectly competitive.

A: In a competitive market there are large number of firms producing similar and identical products…

Q: why do economists and policy makers use perfect competition as a benchmark to analyze market…

A: Perfectly competitive market: - it is a market condition where there are many buyers and many…

Q: What are the advantages of pure competition?

A: Answer: A purely competitive business is the most efficient type of operation. This is due to the…

Q: What is pure or perfect competition? Define and discuss.

A: A firm will  attain profit if its price exceeds average total cost

Q: Many firms, especially in perfectly competitive markets, file for bankruptcy every year, yet they…

A: Firms will shut down when their cost exceed revenue and they cannot continue to compete in the…

Q: Why does perfect competitive market need to be maintained?

A: In an economy, a perfectly competitive market is the place where anyone is allowed to enter or exit…

Q: What are the conditions that distinguish perfect competition from other market structures?

A: In case of Perfect Competition there are large number of buyers and sellers selling identical…

Q: Why economic profit is negat

A: Profit: It refers to the revenue earned by the companies. With more profit earned by the companies,…

Q: How equilibrium price is determined under perfect competition?

A: Under perfect competition, both producers and consumers are price takers.

Q: Which of the following industries most closely approximates the perfectly competitive model? (a)…

A: A producer is a person who manufactures the final product by combining different types of inputs for…

Q: The decision to continue competing in a market depends upon the answers to the following questions…

A: To sustain in the market ones have to bear the fixed cost in the short run as we know.  Compete with…

Q: How do firms in a competitive market work?

A: Perfect competition is a market where there are lage number of seller and buyers of identical and…

Q: What are the unique characteristics of a perfectly competitive market structure compared to the…

A: Perfect competition refers to the situation where there are many buyers and sellers exist in the…

Q: When price is less than marginal cost, a profit-maximizing producer in perfect competition will:

A: In the case of perfect competition, each firm takes the market price as given and hence produces an…

Q: If the producers of rice wants to maximize profit up to what level of output will it produce and at…

A: The allocative efficiency could be achieved by equating marginal private cost with marginal private…

Q: In the long run, any firm will eventually leave the industry if

A: In the long run, any firm will eventually leave the industry if price :

Q: Do you think firms really try to maximize profits? Do firms (especially small ones) know what prices…

A: Economist generally assume that firms act as profit maximisers. Economists don’t think there’s…

Q: Why do firms, in the long run, continue to stay in the industry if they are earning 0 profits?

A: Answer - In the long run where the every input can vary and as in the long run where firms can make…

Q: Is it even better for perfectly competitive firms to produce output even though it is losing money?…

A: In economic theory, perfect competition occurs when all companies sell the same products, market…

Q: What is Perfect competition?

A: Meaning of Market: The term market refers to the situation under which the producers or the…

Q: Only one firm able to produce profitably in a market given demand and costs describes a ____?

A: A monopoly market's features enable the sole seller both the market operator and the value creator.

Q: Assuming that the market for cigarettes is in perfect competition, what do allocative and productive…

A: In a perfectly competitive market, when both the profit-maximizing firms and the utility-maximizing…

Q: Which of the following economists was an originator of the theory of imperfect competition?…

A: The correct answer with detailed explanation is as follows:-

Productive and Allocative Efficiency Analysis

Productive efficiency, also referred to as production efficiency is a term in economics describing the level at which a company is operating at its maximum capacity. Beyond this point, the entity will be unable to manufacture any additional goods without cutting down another product’s production level. This occurrence is an outcome of production happening alongside a Production Possibility Frontier (PPF).