Question

How is it determined for pure competition and monopolistic competition whether the firm is operating in the short-run or the long-run?

Answer 1

in P. Co produces, when P = M. c. competitive firms. Ishost-run the postion the supply -curve that lies above is curve Аус NAME мес. In the short run the form ATCOST produces the MC cure Ave PY AVC PLAVCI (shuddan) STA

the long (in case of perfectly competitive market) r. ( P- ATC).Q ends. when P = ATC making process of entry pexit only Zero economic poofet N 2012 when RAMC = ATO ATC is at its minimum ATC min. akia efficient scale in the long-run equilibrium of a competitive mat. with free entry & exit, floms must be operating at their efficient scale ATC OT AT P= MC 2 ATC So no new firm will enter So, OTA<a P = MC max: poolits MC = ATC P: ATC mini long- run mkt. ss. curve is hostzontal at the price level where also P=MC. Entry f Exit can cause the long-run mkt. SS. Cuore to be perfectly elastic

дето SSY P=MR AR E doo Со

as A monopolistically competitive firm chooses its quantity & price just monopoly does. the shoot rung these two types of mkt. structures Similas Mompoly of M.C are max. Price A lossli PATC) profit a fr. MR. 2 MC & dd. curce for price at this a MC P CATC (P-ATC)- Q MCM Add. •MR PY ATC profit Quantity PRATC loss

In the long in the avit Zero ber In case of Monopolistic firm This process of entry & exit continues until the firms mkt. are making exactly economic profits Bz AT CAR $ +P > MC PYMR and is due to free entry exit due to downward sloping & ATC to tangent to the dd. come r=0 librobita max, profit is exactly zero in the long run

MC Р ATC Quantity that minimizes ATC is called the efficient scale of MC the firm IMR •dd. quantity Efficient Podenced scale Excess Jiji - capacity why there s Mark up Monopolistic competition i bez trzero-r condition ensures that P=ATC. It doesn't ensure that P= Moto bez for Price to equal ATC Price must be above MC