The lowest price in the market is the point where AR=AC - the point where normal profits are being made. Profits will be competed away until the lowest price in the market. The firms will therefore experience a decrease in demand. ![]() The AR (Demand) and MR curves will shift to the left - this is because individual firms are losing customers to new firms. But what happens to the firm's revenue and cost curves? What happens? Similar to perfect competition, the market supply curve will shift to the right because of the increase in firms. That means new firms are going to enter the market - they can do this easily because there are no or low barriers to entry in this market model. What happens when people hear about the supernormal profits being made in this industry? People have the incentive to start their own firms and join the market and have a share in the profits. So in the short-run, supernormal profits can be made. Labour Markets - Taxes, Benefits and Legislation.Labour Markets - Pensions and Participation Rates.Labour Markets - Labour Force Flexibility. ![]()
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