zero economic profit means that the firm is earning a normal or competitive.
zero profit represents a competitive return for the firm's investment of financial capital. with zero economic profit, the firm has no incentive to go elsewhere because it cannot do better financially by doing so. If the firm happens to enter a market sufficiently early to enjoy and economic profit in the short run, so much the better.Thus the cons pet of long-run equilibrium tells us the direction that a firm's behavior is likely to take. zero profit, long run equilibrium should bot discourage a manager, it should be seen in a positive light, because it reflects the opportunity to earn a competitive return
Firms enter an industry when they expect to earn economic profit, even if the profit will be short-lived. These short-run economic profits are enough to encourage entry because there is no cost to entering the industry, and some economic profit is better than none.Zero economic profit in the long run implies normal returns to the factors of production, including the labor and capital of the owner of the firm. So even when economic profit falls to zero, the firm will be doing as well as it could in any other industry, and then the owner will be indifferent between staying in the industry or exiting.
Firms enter an industry when they expect to earn economic profit, even if the profit will be short-lived. These short-run economic profits are enough to encourage entry because there is no cost to entering the industry, and some economic profit is better than none. Zero economic profit in the long run implies normal returns to the factors of production, including the labor and capital of the owner of the firm.
So even when economic profit falls to zero, the firm will be doing as well as it could in any other industry, and then the owner will be indifferent to staying in the industry or exiting.
zero economic profit means that the firm is earning a normal or competitive.
ReplyDeletezero profit represents a competitive return for the firm's investment of financial capital. with zero economic profit, the firm has no incentive to go elsewhere because it cannot do better financially by doing so. If the firm happens to enter a market sufficiently early to enjoy and economic profit in the short run, so much the better.Thus the cons pet of long-run equilibrium tells us the direction that a firm's behavior is likely to take. zero profit, long run equilibrium should bot discourage a manager, it should be seen in a positive light, because it reflects the opportunity to earn a competitive return
Firms enter an industry when they expect to earn economic profit, even if the profit will be short-lived. These short-run economic profits are enough to encourage entry because there is no cost to entering the industry, and some economic profit is better than none.Zero economic profit in the long run implies
ReplyDeletenormal returns to the factors of production, including the labor and capital of the owner of the firm. So even when economic profit falls to zero, the firm will be doing as well as it could in any other industry, and then the owner will be indifferent between staying in the industry or exiting.
GUIDELINE ANSWER:
ReplyDeleteFirms enter an industry when they expect to earn economic profit, even if the profit will be short-lived. These short-run economic profits are enough to encourage entry because there is no cost to entering the industry, and some economic profit is better than none. Zero economic profit in the long run implies normal returns to the factors of production, including the labor and capital of the owner of the firm.
So even when economic profit falls to zero, the firm will be doing as well as it could in any other industry, and then the owner will be indifferent to staying in the industry or exiting.