Profit Maximization in Perfect Competition | How Firms Earn and Lose Profit in Microeconomics

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In perfectly competitive markets, long-run economic profit falls to zero, even though firms can earn profit in the short run. How can both be true? This video breaks it down step-by-step. You’ll learn how firms decide how much to produce, why MR = MC is the profit-maximizing rule, how cost curves determine profit or loss, and why market entry eventually pushes price to the minimum of ATC.

What we cover:
The definition of profit: TR − TC, including opportunity costs
Price-taking behavior and why P = MR in perfect competition
The profit-maximizing rule: MR = MC
How long-run entry drives price to minimum ATC
Why long-run economic profit is zero or “normal profit”
How firms can earn short-run profit when price rises above ATC
The shutdown rule

Whether you’re studying for microeconomics or reviewing cost-curve logic, this video gives you the clean, intuitive framework instructors expect you to know.

#Microeconomics #PerfectCompetition #ProfitMaximization