Each firm in a perfectly competitive industry has the following production function: q = K1/4L1/4 Each firm takes factor prices as given. Factor prices are r = 4, w = 16 Suppose the market demand is given by QD = 900 − P How many firms are there in the industry in the long run?

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One comes across the concept of Profits in the context of business and in analyzing the results of business activity. Profits of a business can be accounting profits, and they can also be economic profits. So how does one understand the concept of accounting versus economic profits?