If a firm is the only single seller of a product and there are no barriers to entry?
Answer:
It all has to do with market contestability. If there are no barriers to entry then the firm would push prices as low as possible to create the illusion of an absence of profits in case more firms wanted to enter. However, the more time the firm spent being a single seller the more barriers would appear, it would gain greater and greater economies of scale, it would dominate producers of natural resources for this industry and eventually the barriers to entry necessary to make it into a monopoly would eventually emerge.
oh yes definitely because this firm will be the only price taker and keep its demand and its importance to the customers, they will set the price of their products.
If a firm earns more than minimum profits (i.e. perfect competition) in a frictionless setting, it will attract new players. The worst that can happen if the firm behaves monopolistically is that new players will enter and drive down prices. This is no worse than the firm pricing low to begin with, to deter entrants.
This worst case will happen only if there are absolutely no barriers to entry, in terms of time, zero capital costs, etc. In the real world, the firm will be able to enjoy supernormal profits for some time. Now if that is the case, the firm can be better off by charging an amount higher than the competitive price but not lucrative enough for other firms to enter, and enjoy this for eternity.
So, I would not expect the firm to set the perfect competition price to deter entrants, but neither would I expect it to behave monopolistically.
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