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If P=MC=MR, then how do companies make profit?

I’m struggling with the concept that in a perfectly competitive market, P = MC and MC = MR, because surely if this is true, then the company would break even because the price that the customer pays for the product is equal to the cost to the company for making it, so the revenue is equal to the costs (MC = MR) and so they make no profit?? I’m so confused, can someone please explain to me why I’m wrong because I’m really freaking out
Original post by gaycinnamonbean
I’m struggling with the concept that in a perfectly competitive market, P = MC and MC = MR, because surely if this is true, then the company would break even because the price that the customer pays for the product is equal to the cost to the company for making it, so the revenue is equal to the costs (MC = MR) and so they make no profit?? I’m so confused, can someone please explain to me why I’m wrong because I’m really freaking out

The perfectly competitive market is a theoretical extreme, meaning its majorly theoretical and used as a yardstick to compare the other imperfect markets
(edited 1 year ago)
Original post by plain__jane
The perfectly competitive market is a theoretical extreme, meaning its majorly theoretical and used as a yardstick to compare the other imperfect markets

so does that mean i’m correct in my logic that a company wouldn’t make profit in a situation in which p = mc = mr?
Original post by gaycinnamonbean
so does that mean i’m correct in my logic that a company wouldn’t make profit in a situation in which p = mc = mr?


'normal' profit is made which literally means breaking even. So yes no real profit is made in a perfectly competitive market (in the long run at least)
They still make profit because in economics we use economic profit as opposed to accounting profit, which includes opportunity costs in the total costs and therefore accounting profit is still being made, but because of the potential opportunity cost of switching to producing another good economic profit = 0 and therefore is ‘normal profit’ look over different types of profit in your textbook- I explained this pretty poorly

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