<P> The same is likewise true of the long run equilibria of monopolistically competitive industries and, more generally, any market which is held to be contestable . Normally, a firm that introduces a differentiated product can initially secure a temporary market power for a short while (See "Persistence" in Monopoly Profit). At this stage, the initial price the consumer must pay for the product is high, and the demand for, as well as the availability of the product in the market, will be limited . In the long run, however, when the profitability of the product is well established, and because there are few barriers to entry, the number of firms that produce this product will increase until the available supply of the product eventually becomes relatively large, the price of the product shrinks down to the level of the average cost of producing the product . When this finally occurs, all monopoly profit associated with producing and selling the product disappears, and the initial monopoly turns into a competitive industry . In the case of contestable markets, the cycle is often ended with the departure of the former "hit and run" entrants to the market, returning the industry to its previous state, just with a lower price and no economic profit for the incumbent firms . </P> <P> Profit can, however, occur in competitive and contestable markets in the short run, as firms jostle for market position . Once risk is accounted for, long - lasting economic profit in a competitive market is thus viewed as the result of constant cost - cutting and performance improvement ahead of industry competitors, allowing costs to be below the market - set price . </P> <P> Economic profit is, however, much more prevalent in uncompetitive markets such as in a perfect monopoly or oligopoly situation . In these scenarios, individual firms have some element of market power: Though monopolists are constrained by consumer demand, they are not price takers, but instead either price - setters or quantity setters . This allows the firm to set a price which is higher than that which would be found in a similar but more competitive industry, allowing them economic profit in both the long and short run . </P> <P> The existence of economic profits depends on the prevalence of barriers to entry: these stop other firms from entering into the industry and sapping away profits, like they would in a more competitive market . In cases where barriers are present, but more than one firm, firms can collude to limit production, thereby restricting supply in order to ensure the price of the product remains high enough to ensure all of the firms in the industry achieve an economic profit . </P>

Under perfect competition marginal revenue is always equal to marginal cost