#23.3 -- Perfect Competition in Long Run Equilibrium (6.29)

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Chapter 23 -- Perfect Competition

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PowerPoint Presentation:

Video #23.3 – Perfect Competition in Long Run Equilibrium

Chapter Learning Outcomes:

Chapter Learning Outcomes Explain the conditions necessary for a perfectly competitive firm to be in long-run equilibrium.

Short-Run Market (Industry) Supply Curve:

Short-Run Market (Industry) Supply Curve The horizontal “addition” of all existing firms’ short-run supply curves

Long-Run Equilibrium:

Long-Run Equilibrium The condition where: P = MC = SRATC = LRATC. There are zero economic profits. Long-run competitive equilibrium exists for the perfectly competitive industry when: No incentive for firms to enter or exit the industry. No incentive for firms to produce more or less output. No incentive for firms to change plant size. In long-run equilibrium, perfectly competitive firms exhibit productive efficiency: production at the lowest possible per-unit cost (lowest ATC).

Long-Run Competitive Equilibrium in the Market & the Firm:

Long-Run Competitive Equilibrium in the Market & the Firm P = MC – Firm has no incentive to move away from the quantity of output at which this occurs (Q1) P = SRATC – No incentive for firms to enter or exit the industry SRATC = LRATC – No incentive for firm to change plant size

Chapter Learning Outcomes:

Chapter Learning Outcomes Explain the conditions necessary for a perfectly competitive firm to be in long-run equilibrium.

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