30.0 30.0 25.0 MC 25.0 sum of 20.Q 20.0 MC 15.0 15.0 curves Price (Php) 10.0 Arice (Php) 10.0 5.0 _ 5.0 0.0 0.0 0 50 70 100 60T 80T 150T 150 Quantity Quantity Panel a Panel b Figure 7.7a Firms Long-Run Figure 7.7b Market's Supply Curve Marginal Curve W INNOVATIONS TO GENERATE ECONOMIC PROFIT Now Luigi is very sad because the prevailing market price of Php4 generates zero economic profit, (remember that he is a price taker). The condition Luigi is confronting is that his P = MR = MC = ATC. Suppose Luigi gets an idea, he can reduce cost by using an alternative source of energy- solar power. This move can lower Luigi's MC and ATC, thus generating for him economic profit. The introduction of new technology or innovation for a firm in a perfect competition is one way for them to generate economic profit. W COMPETITIVE STRATEGY There are three basic competitive advantages of a firm: resource-based, business process and innovation. The first advantage is the ability of the firm to exploit resources such as patents or market distribution. If Mario is able to develop a unique product or services to his target market with their preferred value, he realizes a resource-based advantage. The second competitive advantage is the design of business process that is unique and difficult to imitate, creating value added products or service to customers. Different industries emerge creating different products and services, firms that are able to anticipate changes and plan to sustain their competitiveness in the market realize their competitive advantage through innovation