Question by zodiacfumble: Why do competitive firms make zero profit on long run?
Also, would it be beneficial for a competitive firm to adopt a cost-reduction innovation?
Answer by Jurij-EU
Because if profits exists on market – then other firms enter immediately (due to assumptions of perfect competition), thus expanding supply and consequently reducing market price.
Yes, they will adopt automatically because it is question of survival for the firm on the competitive market.
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