Explain the Process That Drives the Economic Profit to Zero

question 285

Essay

Explain the process that drives the economic profit to zero in the long run for a perfectly competitive firm.

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Definitions:

Total Revenue

The total income received by a company from its sales of goods or services, without any deductions.

Cost Curves

Graphical representations showing how the cost to produce a given level of output changes with the amount of output.

Price-Taker Industry

An industry in which individual companies have no control over the market price of their product; they must "take" the market price as given.

Per-Unit Cost

The cost associated with producing or acquiring one unit of a product or service, calculated by dividing the total cost by the number of units.