"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
"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.”)
ReplyDeleteFrom Baseline Scenario blog: http://baselinescenario.com/2009/07/30/the-problem-with-profits/#more-4518