Question

why can firm not get abnormal profits under perfect competitions for long run

Answer 1

Dear Student

A perfectly competitive market is a hypothetical market where competition is at the highest possible level . Firms produce homogeneous , identical products and there are no barriers to entry and exit into the market . A firm is a price taker and not a price maker in this market . And each firm has perfect knowledge about the market .
In the short run firms can make super normal profits under perfect competition . If this happens then new firms are attracted towards the market . In the long run more firms are set up which raises the supply of goods in the economy . Hence price falls . New firms keep on entering the market till all the super normal profit is exhausted . So in the long run competitive markets cannot make abnormal profits .

Regards .