Purchase Solution

Long-Run Profit in a Perfectly Competitive Market

Not what you're looking for?

Ask Custom Question

For Profit Labs, Inc. (FPL) is a private laboratory that does only routine blood count. With total assets of $8 million last year, FPL took in $3 million in revenue and had expenses of $2 million. The average firms in other industries make a return of only 10 percent on their assets.

The market for lab services is potentially competitive, but right now there are only a few firms in the industry. However, laboratory technicians are free to enter the industry if they wish. Firms in the industry charge around $300 for blood counts, and techs' charge about $20. What do you expect will happen in the long run?

Purchase this Solution
Solution Summary

This solution explains what will happen in a potentially competitive market in the long run as a result of increased competition.

Solution Preview

Problem: For Profit Labs, Inc. (FPL) is a private laboratory that does only routine blood count. With total assets of $8 million last year, FPL took in $3 million in revenue and had expenses of $2 million. The average firms in other industries make a return of only 10 percent ...

Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

View More Free Quizzes
Related BrainMass Solutions

  • Perfectly competitive firms

    This is how a market turns perfectly competitive in the long run - in the short run, since there is scope for earning profits, more and more firms come into the market to partake the profit.

  • Equilibrium Price and Quantity in Perfect Competition

    Note that the perfectly competitive market is initially in long-run equilibrium with price equal to P1. Assume now that there is an increase in demand for the good produced in this market.

  • perfectly competitive market

    No, in a perfectly competitive market, a firm cannot earn any economic profit in the long run. This is because of the inherent nature of the perfectly competitive market.

  • Long-run perfectly competitive firms

    560106 Long-run perfectly competitive firms In long-run equilibrium a perfectly competitive firm will operate where the price is: Select one: a. greater than MR but equal to MC and minimum ATC b. equal to MR, MC and minimum to ATC c. greater

  • Perfectly Competitive Market

    331210 Perfectly Competitive Market Suppose that, in a perfectly competitive market at the profit maximizing quantity, the market price is greater than average total cost.

  • Describe the profit maximizing decision.

    Therefore in the long-run, firms in a competitive market cannot expect to earn profit. Describe the profit maximizing decision a perfectly competitive firm makes in the short run.

  • Long-Run Equilibrium in Perfectly Competitve Markets

    501888 Long-Run Equilibrium in Perfectly Competitve Markets Suppose at present, firms in a perfectly competitive market are earning negative economic profits (losses). Explain the process by which this industry will reach long-run equilibrium.

  • Cost Curves in Perfect Competition and Monopolistic Competition

    This solution shows long and short run firm and market conditions in a perfectly competitive market, and short run profits in a monopolistically competitive market

  • Demands and Costs of Perfect Competition

    The top graph summarizes the demand and costs for a firm that operates in a perfectly competitive market. a. What level of output should this firm produce in the short run? b. What price should this firm charge in the short run? c.

  • Profit and supply

    320686 Profit and supply Question 1 If the long run market supply is perfectly elastic a fall in demand would cause the final equilibrium to be at: a) The same price but at lower output b) A lower price and a lower output c) A lower price but at

View More Related Solutions