Explain the firms in tight markets to gain higher profit than the firms in loose markets.

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Chapter 11, Problem 9QP

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Explain the firms in tight markets to gain higher profit than the firms in loose markets.

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A profit-maximizing price searcher will expand output as long as marginal revenue either exceeds or is equal to marginal cost, lowering its price or raising its price until the midpoint of their demand curve and highest total revenues are achieved. Why are oligopolies able to earn both short-run economic profits and long-run economic profits, while price taking firms like perfect competitors can only earn short-run economic profits?

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