Can a firm earn economic profit in a competitive market?

A firm in a perfectly competitive market might be able to earn economic profit in the short run, but not in the long run. Learn about the process that brings a firm to normal economic profits in this video. Want to join the conversation?

What is the economic ideal of perfect competition?

Read about the economic ideal of perfect competition. A perfectly competitive firm is a price taker, which means that it must accept the equilibrium price at which it sells goods. If a perfectly competitive firm attempts to charge even a tiny amount more than the market price, it will be unable to make any sales.

How do economic losses affect competition?

In the short run, the perfectly competitive firm will seek the quantity of output where profits are highest or, if profits are not possible, where losses are lowest. In the long run, positive economic profits will attract competition as other firms enter the market. Economic losses will cause firms to exit the market.