Discern More about Competitors, and Costs Costing and Pricing for the Long Run
‘In the long run, we are all dead’ – JM Keynes.
This logic falls flat with twenty-first century witnessing enormous growth in every sector including research & development, space science, FMCG so on so forth.How does long run competitive structure affect the economic parameters? Myhomeworkhelp.com has addressed the issue and brought for you competitors, and costs costing and pricing for the long run assignment help.
The objective of the assignment help is to
- Distinguish between economic and accounting profit
- Explain why in long-run equilibrium perfectly competitive firms will earn zero economic profit
Going by logic provided by competitors, and costs costing and pricing for the long run homework help,a firm adjusts all its inputs in the long run. New entrants enter market while old players leave the market. An economic equilibrium is attained in long run where firms operate at lowest cost per unit. Economic equilibrium wipes off economic profit and losses.
Definition of economic profit and losses
- Economic profit attracts new firms in market
- With increase in number of firms, price falls
- Falling price compels many firms to wrap up their business and leave market
- As fewer firms operate in market, price rises reducing losses incurred
- However, firms incurring losses will leave, and process continues till all firms incurring losses leave market
- Remaining firms in market operate with zero economic loss and profit. They operate at zero economic profit.
Distinction between economic and accounting profit
Competitors, and costs costing and pricing for the long run assignment help states there exist a difference between two concepts.
- Economic profit is total revenue minus total cost. Cost in economics is then measured by opportunity cost
- Economic cost can be negative, positive or equal to zero.
- Accounting cost is the explicit cost like cost of labor, capital and other resources that go into production of output
- Accounting profit can never be in negative, in which case, it will be termed as a loss
- Opportunity cost is in addition to explicit costs incurred for production
- Economics considers implicit cost in their calculation unlike accounting calculations
Concept of long run equilibrium and zero economic profits
Competitors, and costs costing and pricing for the long run homework help deals with economic profits that become zero in the long run. To exemplify our statement let us consider two industries operating in market A and B.
- Firms in industry A earns greater profit than firms in industry B
- Firms in industry B experience economic losses and enters industry A to reap greater benefits
- Increased number of firms pushes profit downward and compels firms to leave industry A
- The process continues till all firms in industry A earns zero economic profit and operates at equilibrium
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