A decrease in the firm's output decreases costs as the firm moves down along its marginal cost curve. A decrease in the price of energy will decrease cost at each output level and therefore shifts the firm's cost curves downward. The diagram above shows a perfectly competitive firm's short-run cost curves. The demand for its product is a downward-sloping function. The firm will earn zero economic profits in long-run equilibrium.
Advertising is an important tool of the firm.
The firm will increase its total economic profits if it charges a price that is lower than the market price. The marginal revenue the firm receives from selling an additional unit of output will be different from the price at which it sells that unit. A firm in a competitive market earns zero economic profit in the long-run because of free entry into and exit from this industry. If a typical firm earns an economic profit, new firms enter and market supply increases, causing market price to fall. On the other hand, if a typical firm sustains a loss, existing firms leave the industry, market supply decreases, and price will rise.