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many firms will earn profits in the short term, but they must constantly innovate and compete to earn profits in the long term
The general monopolistically competitive firm does earn profit. They earn point about as much as oligopolies.
Because monopolistically competitive firms have an optimal production allocation at monopoly values: marginal revenue = marginal cost, marking-up to the demand function. When competition is not perfect, marginal revenue does not equal demand but is always below it on a Cartesian plane, so the optimal production value of a monopolistically competitive firm is both less and at a higher price than a perfectly competitive one.
The connection between households and firms in the economy stems from the fact that consumers in this case households work for firms to earn wages as the company makes profits due to increased production.
why do firm stay in business if profit is=0In economic profit is revenue minus all costs,including implicit costs,like the opportunity cost of the owner's time and money.In the zero profit equilibrium,firms earn enough revenue to cover these costs.by Abdul hanan tareen
many firms will earn profits in the short term, but they must constantly innovate and compete to earn profits in the long term
The general monopolistically competitive firm does earn profit. They earn point about as much as oligopolies.
Because monopolistically competitive firms have an optimal production allocation at monopoly values: marginal revenue = marginal cost, marking-up to the demand function. When competition is not perfect, marginal revenue does not equal demand but is always below it on a Cartesian plane, so the optimal production value of a monopolistically competitive firm is both less and at a higher price than a perfectly competitive one.
Firms try to avoid competition so that they can set higher profits and earn greater profits.
An industry whose firms earn economic profits and for which an increase in output occurs as new firms enter the industry.
The connection between households and firms in the economy stems from the fact that consumers in this case households work for firms to earn wages as the company makes profits due to increased production.
why do firm stay in business if profit is=0In economic profit is revenue minus all costs,including implicit costs,like the opportunity cost of the owner's time and money.In the zero profit equilibrium,firms earn enough revenue to cover these costs.by Abdul hanan tareen
In long run under perfect competition new firms enters into the market and share the profit of existing firms due to free entry and exit .the new firms in the long run enters into the market until they earn profit and leaves the market if they suffer looses. In short if there is free entry and exit
Supernormal profits due to high barriers to entry. Profits in the long run are determined by the barriers to entry. If there is high barriers to entry, new firms cannot enter the industry easily and hence cannot competed with existing firms for profits. Existing firms would be able to enjoy supernormal profits. On the contrary, weak barriers to entry means that the long run profits would be competed away by new firms entering the industry, hence firms would earn normal profits. Oligopoly market is characterised by high barriers to entry, largely due to non-price competition such as branding, advertising, etc. High barriers could also be due to economies of scale and high fixed cost.
Credit card companies earn profits by charging interest.
Goodwill is the value of reputation of a irm in respect of the profits expected in future over and above the normal rate of return, which other companies can earn. Over and above the normal rate implies that the firms capability to earn more profits when compared to other firms because of its good brand name, locational advantage, good customer relations or possession of a unique patent right. The impact of goodwill on the net income is that, as good will is amortized the amount of profits get reduced. This further reduces the balacne of reserves and surplus amt in the balance sheet.
In the long run, if a firm is making a profit more firms will enter. This will cause profit to drop. Firms will eventually drop out because of this and economic profit will makes it way to zero(a result of the invisible hand).