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Chapter 8: Q.36 (page 212)

Why will losses for firms in a perfectly competitive industry tend to vanish in the long run?

Short Answer

Expert verified

Because an infinite number of businesses produce infinitely divided, homogeneous goods.

Step by step solution

01

Definition

Perfectly Competitive Markets:

It is considered that consumers have perfect information in a perfectly competitive market. To stay profitable in a completely competitive market, businesses must conform to specific market rules.

02

Explanation

Firms in an exceedingly perfectly competitive market can only make short-term profits or losses. Because an infinite number of enterprises produce infinitely-divisible, homogeneous items, profits and losses are eliminated within the future.

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