{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Perfect Competition in the Long Run

Perfect Competition in the Long Run - Perfect Competition...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
q * LRMC SRAC SRMC P = MR = Demand LRAC Q $ Long Run Equilibrium Perfect Competition in the Long Run Handout Summary of the firm in long run equilibrium 1. In the long run, every competitive firm will earn normal profit, that is, zero profit. 2. In the long run, every competitive firm will produce where price (P) is equal to marginal cost (MC), that is where P = MC. 3. In the long run, every competitive firm will produce where price (P) is equal to the minimum of short run average cost (SRAC), P = SRAC. This implies zero economic profit. 4. In the long run, every competitive firm will produce where price (P) is equal to the minimum of long run average cost (LRAC = ATC), P = minimum LRAC. This implies that no identical firms will want to enter or exit. 5. Putting it all together: P = MC = min SRAC = min LRAC 6. Graphically this gives
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Data Table for Competition in the Long Run y Price TR MR C ATC MC Profit SRAC 5 SRMC 5 SRAC 9 SRMC 9 SRAC 15 SRMC 15 SRAC 18 SRMC 18 SRAC 23 SRMC 23 0.00 292 0 292 0.00 0.00 1.00 292 292 292 371.00 371.00 343.00 -79.00 851.00 103.00 2291.00 6251.00 9041.00 14891.00 2.00 292 584 292 688.00 344.00 292.00 -104.00 479.00 112.00 1079.00 2879.00 4184.00 6959.00 3.00
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 6

Perfect Competition in the Long Run - Perfect Competition...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon bookmark
Ask a homework question - tutors are online