Re:Universal Basic Income Will Likely Increase Social Cohesion
by dllthomas on Wednesday October 28, 2015 @08:54PM
(#10468536)
"But if a firm has accounting profits, that means it's possible for another firm in the industry to price cut them. And in a perfectly competitive market they will."
It's possible, but - again presuming there is positive opportunity cost - as soon as the economic profit falls below zero it is a better idea for them to leave the industry than to lower their profit further.
I don't undercut your prices because I think I'll be taking home less money. I undercut your prices because I think I'll capture your business and make more money overall. If that leaves you (or some other participant) without the ability to make sufficient profit to stick around, you won't.
It's possible, but - again presuming there is positive opportunity cost - as soon as the economic profit falls below zero it is a better idea for them to leave the industry than to lower their profit further.
I don't undercut your prices because I think I'll be taking home less money. I undercut your prices because I think I'll capture your business and make more money overall. If that leaves you (or some other participant) without the ability to make sufficient profit to stick around, you won't.