Zero-profit condition

Zero-profit condition

In economic competition theory, the zero-profit condition describes the condition that occurs when an industry or type of business has an extremely low (near-zero) cost of entry. In this situation, many people tend to join the industry, seeing the opportunity to make money, until there is no more money to make (supply exceeds demand); the large amount of competition limits each person's share of the market, as well as their ability to pursue a large profit margin.

For instance, despite the real estate boom of the mid-2000s, the incomes of real estate agents have not risen significantly. It is easy to become an agent, so when profits start to rise, more people do become agents, and the existing agents start to sell fewer houses.

ee also

* Barriers to entry
* Competition

External links

* [http://www.slate.com/id/2124506 "Bubble-lusions: Why most real-estate agents aren't getting rich", Austan Goolsbee, "Slate", Aug. 26, 2005.]


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