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Jarvis Tillman
on Nov 16, 2024

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A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

Economic Profits

The disparity between a company's overall income and the sum of its explicit and implicit expenses.

Accounting Profits

The net income of a company after all expenses, including taxes and operating costs, have been subtracted from total revenues, according to standard accounting practices.

Perfectly Competitive

A market structure characterized by a large number of small firms, identical products, and free entry and exit, leading to price taking behavior.

  • Understand the principles of economic profit and accounting profit, and their repercussions on decision-making within firms.
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Paola BarrosNov 17, 2024
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