Normal profit
Normal profit signifies zero economic profit. Explain why?
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Answer: Assume that the existing firms are earning over normal profits. Attracted by the positive gains, the new firms enter in industry. The market supply rises and the price comes down. New firms carry on entering and the price persists to fall till economic profits are decreased to zero.
In condition of losses, firms begin leaving the industry, supply downs and prices begins going up and all this carry on till losses are wiped out. Remaining firms in industry then once again earn only normal profits or zero profit.
Examine within your answer the circumstances that will enable a company to pass on cost increases to customers and protect profit margins. For example- price sensitivity of demand, rising food prices, cotton prices, etc.
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For Cournot’s Spring Water the demand is perfectly price elastic at: (i) point a. (ii) point b. (iii) point c (iv) point d. (v) point e. Discover Q & A Leading Solution Library Avail More Than 1425043 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads No hassle, Instant Access Start Discovering 18,76,764 1955547 Asked 3,689 Active Tutors 1425043 Questions Answered Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!! Submit Assignment
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