Why can't firms enter a market under perfect competition in the short run?Watch
The book is talking about how it is possible for firms to make abnormal profit in the short run but in the long run, new firms will enter the market...
I don't understand how having at least one fixed factor of production prevents new firms from entering the market. Doesn't the fact that there is complete freedom of entry allow new firms to enter in the short run as well as the long run?
Thanks in advance.
What Exam board are you with? I'm with AQA
I haven't done this topic for 10 years but iirc, the fixed factor of production is a huge cost for new business eg machinery. The original business make abnormal profit due to lack of competition but if a new business pays the cost for this factor of production then they are in if for the long term. A short term business cannot pay this price and turnover a profit then leave. Just doesn't work