In perfect competition, the existence of free entry and exit ensures that firms earn only normal profits in the long run. Since firms are price takers and produce at the point where price equals marginal cost and minimum average total cost, the market price is driven down to the minimum average cost of production.

In perfect competition, the entry and exit of firms ensure that economic profits are competed away in the long run, leaving only normal profit. This equilibrium occurs where the price equals the minimum point of the long-run average cost curve, meaning firms are operating at their most efficient scale.

In perfect competition, the entry and exit of firms ensure that economic profits are competed away in the long run, leaving only normal profit. Furthermore, because products are homogeneous, firms do not need to differentiate their offerings, thus eliminating the need for selling costs like advertising.

A cartel is a formal or informal agreement between competing firms in an industry to control prices, limit supply, or allocate market shares. By acting together, they attempt to behave like a monopoly to maximize collective profits.

The Lerner Index is a measure of a firm's market power, calculated as the difference between price and marginal cost divided by price. A value of zero indicates perfect competition, while higher values approaching one indicate greater market power and the ability of a firm to set prices above marginal cost.

In long-run perfect competition, firms earn normal profits. This occurs where the price (AR) equals marginal revenue (MR), average cost (AC), and marginal cost (MC). This point represents the minimum of the long-run average cost curve.

Profits are dynamic and influenced by market structures. In the long run, competitive forces often drive economic profits toward zero. Profits can be negative (losses) if costs exceed revenue. Furthermore, monopolies typically sustain higher profits due to barriers to entry compared to firms in perfect competition, where price-taking behavior limits profit margins.

A free market economy is characterized by private ownership of resources, freedom of choice for consumers and producers, and minimal government intervention. Assumptions (i) through (iv) describe the core mechanics of this system: factor integration, monetary income, individual choice, and lack of central planning. Statement (v) is a critique of the system's outcomes rather than a foundational assumption of its economic freedom.

While a monopolist has market power, their fundamental economic objective is to maximize profit. This is achieved by producing at the level where marginal revenue equals marginal cost. Charging the highest possible price is not the goal if it reduces total profit by significantly lowering the quantity sold.

In a perfectly competitive market, there are many buyers and sellers, and products are homogeneous. Because no single buyer or seller has significant market share, they are 'price takers' and cannot influence the market price. Therefore, the statement that an individual seller or buyer can influence the price is incorrect and contradicts the definition of perfect competition.