ECON281 Chapter 9: Chapter 9 NOTES.docx
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ECON281 Full Course Notes
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Long run perfectly competitive equilibrium occurs when: each firm maximizes profits with regards to output and capital, where p=mc, each firm"s economic profit is zero (as firms keep entering until the price is pushed down to zero profits) (p=ac, market demand = market supply. An increaseing cost industry is an industry where increases in output increase the price of inputs. (cid:224) increasing demand will cause price to increase, and firms to enter the market, but as output increase; input prices increase. (cid:224) rise in demand causes a fall in price & increase in costs. A decreasing cost indusrty is an industry where increasing in output decreases the price of inputs. (cid:224) increasing demand will cause price to increase, causing more firms to enter the market, but as firms produce more, input prices fall; market prices fall. (cid:224) rise in demand, causes a fall in prices & lower costs.