LONG-RUN OUTCOMES IN PERFECT COMPETITION

New firms enter as long as there is

economic profit (P > min ATC).

The long-run market equilibrium of a perfectly competitive industry is

efficient: no mutually beneficial transactions go unexploited.

The short-run industry supply curve:

how the Q supplied by an industry depends on the market price (given a fixed number of producers).

short-run industry supply curve shows

how the quantity supplied by an industry depends on the market price given a fixed number of producers.

If P > break-even (min ATC), firms are

profitable

A higher price attracts new entrants in the long run,

raising industry output and lowering price.

A fall in price induces existing producers to exit in the long run,

reducing industry output and raising price.

A market is in long-run equilibrium when

the quantity supplied equals the quantity demanded, given that sufficient time has elapsed for entry into and exit from the industry to occur.

here is a short-run market equilibrium when

the quantity supplied equals the quantity demanded, taking the number of producers as given.

industry supply curve shows

the relationship between the price of a good and the total output of the industry as a whole.

In a perfectly competitive industry in equilibrium, the value of marginal cost is

the same for all firms.

In a perfectly competitive industry with free entry and exit, each firm will have

zero economic profit in long-run equilibrium.