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Unformatted text preview: 11/11/2009 1 Long Run Industry Supply Long Run Industry Supply LR equilibrium p = min LRATC LR industry supply curve perfectly elastic at p=min LRATC 23 the number of firms changes to meet demand at min LRATC ($/unit) MC P Firm Market- constant-cost (constant factor prices) S LR Firm Q MC AVC ATC Market Q D P S A D B P (LR) S C Minimum Efficient Scale If every firm has the same cost structure... (have access to the same technology) ...then we cant say which firms will be in the industry and which wont we can only calculate how many firms will be in the industry Entry and Exit Entry and Exit industry LR: P = minLRATC MES: minimum efficient scale lowest quantity any firm would produce Demand at the LR price: D(minLRATC) Number of firms that fit in the industry: # = D(minLRATC) / MES If firms have differing cost structures ... proprietary technological innovation managerial skill and innovation differing factor prices...
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