ECO 1304 Lecture Notes - Lecture 36: Perfect Competition, Productive Efficiency

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greygrasshopper518

31 Dec 2017

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In perfect competition, long-run equilibrium occurs at zero economic profits. 8. 5 section check: economic profits will encourage entry of new firms, which will shift the market supply curve to the right, driving down prices and revenues to the firm. This is the long-run equilibrium for the competitive firm. Any positive economic profits signal resources into the industry, driving down prices and revenues to the firm. Any economic losses signal resources to leave the industry, leading to supply reduction, higher prices, and increased revenues. In a constant-cost industry, prices of inputs do not change as output changes. In an increasing-cost industry, the cost curves of the individual firms rise as total output increases; in a decreasing-cost industry, the cost curves decline as total output increases. How is perfect competition economically efficient: perfect competition requires a firm to operate at the minimum of its.

Related Questions

Match the following.

constant-cost industry	A market structure in which a large number of firms sell a homogenous product or service with no restrictions on entry or exit and each firm is a price-taker.
increasing-cost industry	The demand facing a price-taking firm.
long-run equilibrium	A firm produces zero output but must still pay its fixed costs.
marginal revenue product	Price below which a firm shuts down in the short run.
perfect competition	All firms produce where price equals long-run marginal cost, and economic profits are zero.
perfectly elastic demand	Industry in which input prices rise as all firms in the industry expand output.
shut down	Industry in which input prices remain constant as all firms in the industry expand output.
the shut-down price	The additional revenue earned by hiring one more unit of a variable input.

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32) If firms in a competitive industry are suffering economic losses, then one would expect that in the long run A) the demand curve for the product will shift to the left, causing equilibrium output and price to decline. B) there would be no change in the number of firms in the industry as long as firms are covering their average variable costs. C) the supply curve for the product will shift to the left as firms leave the industry, causing industry output to fall and price to rise. D) the supply curve for the product will shift to the right as individual firms lower their prices to increase their sales. E) each firm would raise its price until it was breaking even.

29) If firms in a competitive industry are suffering economic losses, then one would expect that in the long run A) the demand curve for the product will shift to the left, causing equilibrium output and price to decline. B) there would be no change in the number of firms in the industry as long as firms are covering their average variable costs. C) the supply curve for the product will shift to the left as firms leave the industry, causing industry output to fall and price to rise. D) the supply curve for the product will shift to the right as individual firms lower their prices to increase their sales. E) each firm would raise its price until it was breaking even.

ECO 1304 Lecture Notes - Lecture 36: Perfect Competition, Productive Efficiency

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