Long ‐ Run Supply In the long-run, firms can vary all of their input factors. The ability to vary the amount of input factors in the long-run allows for the possibility that new firms will enter the market and that some existing firms will exit the market. Recall that in a perfectly competitive market, there are no barriers to the entry and exit of firms. New firms will be tempted to enter the market if some of the existing firms in the market are earning positive economic profits. Alternatively, existing firms may choose to leave the market if they are earning losses. For these reasons, the number of firms in a perfectly competitive market is unlikely to remain unchanged in the long-run. Zero economic profits. The entry and exit of firms, which is possible in the long-run, will eventually cause each firm's economic profits to fall to
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This note was uploaded on 11/19/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.