EC 201 Lecture Notes - Lecture 12: Marginal Revenue, Monopoly, Perfect Competition
Document Summary
A perfectly competitive firm will shut down and produce output level q=0 if: price < min atc, min avc < price < min atc, price < min avc, p = mr. Equilibrium, efficiency, and market dynamics in the long run: If more firms entered the market caused the equilibrium price to decrease, it will be below atc which will cause there to be there a loss. Losses being made in the long run will cause sellers to leave the market (supply curve will shift back to s 2 ) Long run equilibrium occurs where there is no profit being made; mr=mc= atc. Definition: an industry in which the firms cost structures do not vary with changes in production. Definition: a supply curve that represents the long-run relationship between price and quantity. If demand increases, the price will increase, and there will be more profit being made in a perfectly competitive firm.
