Why are no supernormal profits made in perfect competition in the long run?

Supernormal profits are made when Total Revenue is greater than Total Costs. When no supernormal profits are made Total Revenue = Total Costs, (it therefore follows that Average Revenue = Average Costs).In a perfectly competitive market model there are no barriers to entry or exit to the market, meaning that it is extremely easy for firms to enter or leave the market.Let’s assume that a firm (let’s call her firm ‘X’) makes supernormal profits in the short term (AR > AC). This will act as a signal for other firms to enter the market. As more firms enter the market demand for ‘X’ product will fall. This is translated on the firm diagram as a downward shift of the Demand=AR=MR curve (in this case not a curve but a straight horizontal line). Therefore, as Demand falls, so does Average Revenue. In the long term the market will wipe out all supernormal profits, forcing AR to fall to where AR=AC. At that point no supernormal profits are made.NoteSome diagrams may write ATC (average total cost) instead of AC (average cost). Don’t worry, they’re the same thing. The same goes for AR (average revenue) and ATR (average total revenue).