"In a true competitive market, one without barriers to entry or market power, companies should not earn any profits at all, because competition will drive price down to marginal cost. (Steve Goldman, one of my economics professors, once said that if you wake an economist up in the middle of the night and ask him or her, “what is price?,” he should answer, “marginal cost.”) From Baseline Scenario blog: http://baselinescenario.com/2009/07/30/the-problem-with-profits/#more-4518
All entries prior to August 15, 2007 appeared on the economic education blog of the Federal Reserve Bank of Chicago. Entries between August 15, 2007 and July 31, 2009 were under the auspices of the Powell Center for Economic Literacy in Richmond, VA.
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"In a true competitive market, one without barriers to entry or market power, companies should not earn any profits at all, because competition will drive price down to marginal cost. (Steve Goldman, one of my economics professors, once said that if you wake an economist up in the middle of the night and ask him or her, “what is price?,” he should answer, “marginal cost.”)
From Baseline Scenario blog: http://baselinescenario.com/2009/07/30/the-problem-with-profits/#more-4518
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