Assignment Task: Small businesses/firms in a particular industry/market (such as cafés, restaurants, and barbers/hairdressers) make positive short-run economic profits but tend to break even (i.e. make zero economic profit) in the long run.
PART 1: What is the name of this type of industry/market? Outline the characteristics of this industry/market.
PART 2: Explain why a business/firm in this industry/market makes a positive economic profit in the short run. Illustrate your answer with a real-life example.
PART 3: Explain why the business/firm discussed in part (b) would break even (i.e. make zero economic profit) in the long run.
PART 4: Briefly compare the long-run outcomes of this firm with the long-run outcomes of a firm operating in a competitive industry/market. You may focus your answer on the following outcomes: output, price, excess capacity, and efficiency.