perfect_competition

The perfectly competitive firm does this in long run

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Unformatted text preview: e Efficiency is the situation that exists when a firm produces its output at the lowest possible per unit cost (lowest ATC). The perfectly competitive firm does this in Long-Run Equilibrium. The Process of Moving from One Long-Run Competitive Equilibrium Position to Another Industry & Cost Relationships • In a Constant-Cost Industry, average total costs do not change as output increases or decreases when firms enter or exit the market or industry. Output is increased without a change in the price of inputs. • In an Increasing-Cost Industry, average total costs increase as output increases and decrease as output decreases when firms enter and exit the industry. This industry is characterized by an upwardsloping Long-run supply curve. Long-Run Industry Supply Curves In a Decreasing-Cost Industry, average total costs decrease as output increases and increases as output decreases when firms enter and exit the industry. What Happens As Firms Enter An Industry In Search Of Profits? • New firms bring down the prices for consumers; the market can aff...
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This note was uploaded on 09/16/2012 for the course ECONOMICS 90 taught by Professor Srinivas during the Spring '12 term at SMU.

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