In perfect competition, a perfectly competitive firm will produce a greater quantity of output in the long run. As new firms enter, the supply curve shifts to the right, prices fall, and profits fall. Firms continue to enter the industry until economic profits are zero.
If firms in an industry are experiencing financial losses, some will leave. The supply curve shifts to the left, increasing the price and decreasing the loss. Firms continue to quit until the remaining firms suffer losses—until the economic profit is zero. There are no barriers to entry and the companies' products are identical. Perfect competition is a market in which economic forces operate unhindered. For a market to be called perfectly competitive, it must meet certain strict conditions. Some of these conditions are Both buyers and sellers become price takers. The number of companies is huge. There are no barriers to entry. The firm's products are identical, etc.
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