Question

In the long run, a firm in a perfectly competitive market earns zero economic profit, so the opportunity in the short run to enjoy positive economic profits will cause existing firms to increase output and new firms to enter the market.

Answer 1

exit, up, zero economic profit

prodance at the 1) A perfectly competitive from will output level where P=MC (to more poofst) I will in the shoot sun otherwise produce PAVC ly 성 will shut down if PLAVC (as the curve is its MC . P MC . shost sun supply the portion of that lies above AVC). - Proofit zone profit point Ave Loss but continue operating, in shost - run shutdown point shut down zone Q ATC Zone- 1 PAVC

A perfectly competitive firm produces at the output level where P=Mc (to max. profit) arenen the shoot sun P>Ave otherwise will produce in if & will shutdown P< ANC if 보 the the short run as firm's ss. curve is we dla lang that lies above the postion of its MC curre AVC ). thus the long more news nun ry = P> ATC i.e. the firms, will enter in if its earning economic profit & will enter until pep. Other gly P= ATC so to attain normal profit !

in the long (in case of perfectly competitive market, r. ( P-AIC), Q 6 process of entory p exit ends only when P = ATC Zezo economic profit making NPOST when RA MC = ATC ATC is at its minimum. ATC min. → a.k.a efficient scale in the long-run equilibrium g a competine mkite with free entry of exit , floms must be operating at their efficient scale STAT . P = MC 2 ATC So, Sla o no new firm will enter P = MC profits MC = ATC-> P. ATC mini long- run mkt. ss. curve is hostzontal at the price level where also P-MC. Entry & Exit the long-run mkt. ss. curre can cause perfectly elastic

g то ssy P=MREAR € 40