ECN 102 Lecture Notes - Lecture 24: Opportunity Cost, Marginal Revenue, Deadweight Loss
Document Summary
Long-run equilibrium: the process of entry or exit is complete remaining firms earn zero economic profit. Zero economic profit occurs when p = atc. Since firms produce where p = mr = mc, the zero-profit condition is p = mc = atc. Recall that mc intersects atc at minimum atc. Hence, in the long run, p = minimum atc. Recall, economic profit is revenue minus all costs including implicit costs, like the opportunity cost of the owner"s time and money. In the zero-profit equilibrium: firms earn enough revenue to cover these costs, accounting profit is positive. Sr & lr effects of an increase in demand. Why the lr supply curve might slope upward. The lr market supply curve is horizontal if: all firms have identical costs, and, costs do not change as other firms enter or exit the market. If either of these assumptions is not true, then lr supply curve slopes upward: firms have different costs.
