Suppose a firm insisted on producing at capacity (QC) even after entry has forced it to a level of demand at which only zero profits are possible? In order to sell this added output the firm would also need to lower price to PC.

    Not only would this not be profit maximizing, but the firm would actually incur losses, shown to the right by the shaded area. It is not impossible that a firm would choose this behavior, but the owner would choose to earn less than her opportunities elsewhere would afford her.

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