Start with a short run equilibrium in which each firm

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Start with a short run equilibrium in which each firm makes profit.
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Competitive Market in the Long Run. The profit acts like a “carrot” that lures more firms to enter the market profit gets smaller.
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Competitive Market in the Long Run. Long run equilibrium occurs when: Firms choose inputs and thus output optimally Consumers maximize utility given budget restriction There are no incentives to enter or exit from the market, that is: zero profit condition is satisfied. No excess demand or supply (demand = supply).
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Competitive Market in the Long Run. Long run equilibrium.
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Exercise A representative firm in a perfectly competitive, constant cost industry has a cost function: What is the LR equilibrium price for this industry. Demand is given by Q = 1000 P, how many firms will operate in this LR equilibrium. A $36 lump sum subsidy is given to each firm. What would be the new LR equilibrium price? 2 4 100 100 TC Q Q
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