ECN 104 Lecture Notes - Lecture 2: Perfect Competition, Economic Surplus, Creative Destruction
Document Summary
In the long run firms are able to enter and exit. Entry and exit if the industry is profitable , more firms enter if the industry is taking a loss firms exit have identical cost curves such. Lr product price equals firm "s average total cost. # of firms for individual firms , level profit in. Equilibrium assuming zero profit , we mean economic profit is. Accounting profit is positive , which is equivalent to the opportunity cost of operating in other industries. What if the industry is taking a loss. Draw a diagram and explain in a few words. This is no longer profitable , so firms exits reducing industry supply and raises from !2! to !3! output from qo to. Industry expansion or contraction doesn"t affect resource prices or production cost: graphically , entry or exit doesn"t shift long . run. Long run supply of constant cost industry is perfectly elastic.