economics

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What can't a perfectly competitive market earn economic profits in the long run?

  • economics -

    Remember, economic profits are not the same as accounting profits. Economic profits account for the opportunity cost of engaging in the business.

    If a business is earning economic profits, then somebody else will see there are profits to be made. So, more people will enter into the business line, increasing supply and driving down price. A lower price means lower economic profits for everybody. People will continue to enter until economic profits are driven to zero.

  • economics -

    Thank You.

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