do firms profit in perfect competition 
profits may be possible for brief periods in perfectly competitive markets but the market s dynamics cancel out the effects of positive or negative profits and bring them toward an equilibrium because there is no information asymmetry in the market other firms will quickly ramp up their production or reduce their manufacturing costs to achieve parity with the firm which made profits the average revenue and marginal revenue for firms in a perfectly competitive market are equal to the product s price to the buyer as a result the perfectly competitive market s equilibrium which had been disrupted earlier will be restored in the long run an adjustment of supply and demand ensures all profits or losses in such markets tend toward zero perfect competition vs monopolythe opposite of perfect competition is a monopoly where a single company controls the supply of a certain product in monopoly conditions consumers cannot go elsewhere if the price is too high they can only decide not to buy the product this means that rather than setting prices by supply and demand the monopolistic firm can simply set a price point that maximizes its profits some types of firms are considered natural monopolies because there is a significant first mover advantage that discourages competitors from entering the market other monopolies may be established through government actions or by cartels such as opec examples of perfect competitionas mentioned earlier perfect competition is a theoretical construct and doesn t actually exist as such it is difficult to find real life examples of perfect competition but there are variants present in everyday society consider the situation at a farmer s market a place characterized by a large number of small sellers and buyers there is typically little differentiation between products and their prices from one farmer s market to another how the produce is grown does not matter unless they are classified as organic and there is very little difference in how they re packaged or branded thus even if one of the farms producing goods for the market goes out of business it will not make a difference to average prices the situation may also be relatively similar in the case of two competing supermarkets which stock their aisles from the same set of companies again there is little to distinguish products from one another between both supermarkets and their pricing remains almost the same another example of perfect competition is the market for unbranded products which features cheaper versions of well known products product knockoffs are generally priced similarly and there is little to differentiate them from one another if one of the firms manufacturing such a product goes out of business it is replaced by another one the development of new markets in the technology industry also resembles perfect competition to a certain degree for example there was a proliferation of sites offering similar services during the early days of social media networks some examples of such sites are sixdegrees com blackplanet com and asianave com none of them had a dominant market share and the sites were mostly free they constituted sellers in the market while consumers of such sites who were mainly young people were the buyers the startup costs for companies in this space were minimal meaning that startups and companies can freely enter and exit these markets technologies such as php and java were largely open source and available to anyone capital costs in the form of real estate and infrastructure were not necessary remember that mark zuckerberg effectively founded facebook from his college dorm 