Question:

Help me with this Economics question PLEASE!!!!?

by Guest64094  |  earlier

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Assume a competitive market has firms earning large economic profits. What is expected to happen over time in this competitive market and to firm’s profits?

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2 ANSWERS


  1. a few things will happen:

    1) You can assume more firms enter the market making it more competitive.

    2) Firms will try to grow by grabbing market share (% of the market) so you will see prices drop as they compete for more sales.


  2. This is a very general question which can best be explained by using Michael Porters Five Forces model. This link will explain in some detail the possibilities of any organisation which competes within the marketplace. The success of any firm will be determind by a number of forces outlined in this model. I think it hits the nail on the head.

    http://www.quickmba.com/strategy/porter....

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