classify the statements based on whether each describes a perfectly (purely) competitive firm earning an economic profit, a firm at zero economic profits, or a firm operating at a loss. you are currently in a sorting module. turn off browse mode or quick nav, tab to items, space or enter to pick up, tab to move, space or enter to drop. economic profit zero economic profit economic loss

Whether or whether each assertion describes a perfect (pure) competitive firm will determine how true it is. Long-term economic profit for businesses will be nil.

What does zero economic profits mean?

There's no economic profit whenever a company's total revenue equals the total of its visible and invisible costs. In other words, it happens when a company's revenue is equal to zero after subtracting all of its costs, both explicit and implicit. A company would make the same amount of money if its resources were put to use in the next best option if economic profit was zero. Businesses are motivated to leave the market if the economic profit is negative since it would be more advantageous to employ their resources elsewhere.

What occurs when a company generates no economic profit?

Thus, a company making no economic profit is undoubtedly making normal profit, which is the minimal return that a producer anticipates from the sale of a good and which is factored into the price of the good. The zero-profit condition, as according economic competition theory, develops whenever the cost of entering or quitting a particular business is as near to zero as is feasible.

Briefing:

New businesses will enter the market when perfect competition prevails and economic profits are positive. Negative economic profits will cause some businesses to leave the market. Because of this, businesses in perfect competition never have a long-term economic profit.

Competitive business - A highly competitive business is referred to as a rate taker since the pressure of rival businesses pushes them to accept the market's current equilibrium rate. A business will lose all of its profits to competition if it raises the price of a product in a highly competitive market by even a cent.

A competitive business is one that operates in a market where: (1) there are lots of buyers and lots of sellers; (2) the goods offered by the many sellers are generally comparable; and (3) businesses can typically enter and exit the market freely.

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