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Critically discuss why a firm in perfectly competitive market would select to remain in business, if its profit is zero at equilibrium. Describe any theories or concept you decide to employ to answer this problem with numerical exs.

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.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M937607

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