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Enterprises entering the monopolistic competition market may realize profit increase or loss in the short term, but will realize normal profit in the long run. If the price of the enterprise is high enough to offset the fixed cost above the marginal cost, it will attract the enterprise to enter the market to obtain more profits.
Abnormal profit persists in the long run in imperfectly competitive markets where firms successfully block the entry of new firms. [3] Abnormal profit is usually generated by an oligopoly or a monopoly ; however, firms often try to hide this fact, both from the market and government, in order to reduce the chance of competition, or government ...
Marshall's original introduction of long-run and short-run economics reflected the 'long-period method' that was a common analysis used by classical political economists. However, early in the 1930s, dissatisfaction with a variety of the conclusions of Marshall's original theory led to methods of analysis and introduction of equilibrium notions.
The imperfectly competitive structure is quite identical to the realistic market conditions where some monopolistic competitors, monopolists, oligopolists, and duopolists exist and dominate the market conditions. The elements of Market Structure include the number and size of sellers, entry and exit barriers, nature of product, price, selling ...
The firm in a perfectly competitive market will operate in two economic time horizons; the short-run and long-run. In the short-run the firm adjusts its quantity produced according to prices and costs. While in the long run the firm is adjusting its methods of production to ensure they produce at a level where marginal cost equals marginal ...
The book discusses the views of Alfred Marshall and Arthur Cecil Pigou on competition and the theory of the firm. Marshall believed that competition was imprecise, with prices being influenced by the rise and fall of demand. He also used the analogy of trees in a forest to explain how firms grow and establish a monopoly.
In the long run, a firm will theoretically have zero expected profits under the competitive equilibrium. The market should adjust to clear any profits if there is perfect competition. In situations where there are non-zero profits, we should expect to see either some form of long run disequilibrium or non-competitive conditions, such as ...
Different economists have different views about what events are the sources of market failure. Mainstream economic analysis widely accepts that a market failure (relative to Pareto efficiency) can occur for three main reasons: if the market is "monopolised" or a small group of businesses hold significant market power, if production of the good or service results in an externality (external ...