Unformatted text preview: available (and contract when they face decreasing returns to scale) . x In the long run, the market price will be driven down to the minimum point on the LRAC curve and profits go to zero. LRAC SRAC SRAC SRMC SRMC firm A firm C firm B SRAC In the short-run, firms A and B are breaking even. In the long run, firms producing at the optimal scale (like firm C) will force firms A and B to become more efficient. (Firm C can profit at lower price) . Eventually, all firms will produce at the optimal scale. Q p SR p* LRAC, SRAC, SRMC SRMC optimal scale Page 118...
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- Fall '10
- Economics, Economics of production, Cost curve, long-run average cost, C SRAC