CHAPTER 14FIRMS IN COMPETITIVE MARKETS311Thus, for these two reasons, the long-run supply curve in a market may be up-ward sloping rather than horizontal, indicating that a higher price is necessary toinduce a larger quantity supplied. Nonetheless, the basic lesson about entry andexit remains true. Because firms can enter and exit more easily in the long run than in theshort run, the long-run supply curve is typically more elastic than the short-run supplycurve.QUICK QUIZ:In the long run with free entry and exit, is the price in a market equal to marginal cost, average total cost, both, or neither? Explain with a diagram.CONCLUSION: BEHIND THE SUPPLY CURVEWe have been discussing the behavior of competitive profit-maximizing firms. Youmay recall from Chapter 1 that one of the Ten Principles of Economicsis that rationalpeople think at the margin. This chapter has applied this idea to the competitivefirm. Marginal analysis has given us a theory of the supply curve in a competitivemarket and, as a result, a deeper understanding of market outcomes.
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