Perfect competiiton: profit-maximizing conditions?

Question

Describe in your own words the profit-maximizing conditions for firms in the short-run and in the long-run. If a firm is operating in a perfectly competitive industry, what is profit going to be in the long run? Explain.

Answer 1

profit maximizing in SR: price=marginal cost

in LR: price=average total cost

long run profit is zero, because firms will enter and exit until there is no benefit for the marginal firm to enter

Answer 2

As we know that firm's equilibrium conditions are

1.  MC=MR (Necessary Condition)

2.  and after that point slope of MC > slope of MR. (Sufficient Condition)

The condition of Profit Maximizing in PC is at Equilibrium point AR > AC both in short run and in long run.

Most of the firms earn Normal profit in long run and that point is MC = MR = AR = AC. this is the condition of normal profit in long run of a firm.