Analysis of zero profit conditions

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Reference no: EM1372069

Describe why a company in a perfectly competitive market would choose to remain in business, if its profit is zero at equilibrium. Illustrate any theories or concept you decide to use to answer this question with numerical examples.

The analysis of zero profit conditions showed that firms might remain in business for a time despite being unprofitable. This situation is possible particularly for firms with high fixed capital costs. The long run price must cover out of pocket costs such as labour, materials, equipment, taxes, and other expense, along with opportunity costs such as competitive return on the owner's invested capital.

Reference no: EM1372069

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