Economics Perfect Competition Questions
In an oligopolistic market, the long-run equilibrium is characterized by a few dominant firms that have significant market power. These firms compete with each other through non-price competition strategies such as advertising, product differentiation, and innovation. The market is typically characterized by barriers to entry, which limit the number of firms that can enter the market. As a result, the existing firms can earn economic profits in the long run. However, these profits attract new firms to enter the market, leading to increased competition and a decrease in profits. Eventually, the market reaches a long-run equilibrium where firms earn normal profits, meaning that their total revenue equals their total costs. At this equilibrium, the market is relatively stable, with firms continuing to compete through non-price competition strategies to maintain their market share.