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| 1. |
Why can a firm not earn abnormal profits under perfect competition in the long run? Explain. |
| Answer» SOLUTION :It is because the no. of sellers is so large that the share of each seller is insignificant in the total supply. Hence, an individual seller cannot INFLUENCE the market price. Similarly, a single buyer's share in total purchase is so insignificant because of their large no. that an individual buyer cannot influence the market price. Under such conditions, price of a commodity is determined by the market FORCES of demand and supply and each buyer and seller has to accept the same price. As a RESULT, uniform price prevails in the market. | |