Principles of Microeconomics / Unit 7 MIC 0624 short lesson, about 20 seconds
How Entry Drives Profit to Zero
Captions available
The idea
No single firm moves the price, but many entering shift market supply right and price falls. Entry continues until price reaches minimum average total cost and profit is gone; exit reverses it.
In practice
Each newcomer shaves the price; together they remove the profit.
Where people slip
The firm's output falls as price falls while industry output rises, since there are more firms.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Something wrong in this lesson? Flag it