How do firms compete with each other in the industry, both in terms of price andnon-price competition?

The market selected is a perfect competition. Perfect competition is characterized by a
large number of firms where none is large enough to influence the industry. Firms in a perfec
competition produce homogenous products. Firms do not set the price and instead are price
takers. In a perfect competition, there are no barriers to entry. Further, there is perfect
information concerning the price of commodities. The profit-maximizing price is equal to the
marginal cost (P=MC) (Azevedo, & Gottlieb, 2017). A large number of firms present in a market
coupled with the perfect information that exists in the market means that firms have to accept the
prices that prevail in the market. If firms charge a higher price compared to the price that is
prevailing in the market, they lose out customers to other firms. The intersection of demand and
supply dictates the price in the market.
Are some firms in the industry able to earn economic profits in the long run? Why
or why not?
In a perfect competition, firms do not earn economic profits in the long run. In the long
run, a perfect competition produces an equilibrium. An equilibrium is set by the intersection of
the demand and the supply curve (Azevedo, & Gottlieb, 2017). An equilibrium is economically
efficient. It achieves the optimal distribution of resources. As a result, firms do not earn an
economic profit. This can be compared with a monopoly that charges prices that are higher than
the equilibrium prices. The implication is that a monopoly is able to earn economic profit in the
long run.

References

Azevedo, E. M., & Gottlieb, D. (2017). Perfect competition in markets with adverse
selection. Econometrica, 85(1), 67-105.