What is the economic profit that all firms earn

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(a) What assumptions are necessary for a market to be perfectly competitive? In light of what you have learned in this chapter, why is each of these assumptions important? (Hint: consider perfectly competitive firms' demand curve, market power and long-run economic profits with these assumptions.)
(b) In what condition will a perfectly competitive firm that incurs economic losses choose to produce rather than shut down in the short run? Why will the firm do so?
(c) Should a firm produce at an output level at which long-run average cost is minimized? Explain. What is the economic profit that all firms earn in a perfectly competitive industry in the long run equilibrium?

Reference no: EM13192326

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