8b - PURE COMPETITION - LONG RUN EQUILIBRIUM AND EFFICIENCY From Short-run to Long-run in Perfectly Competitive Markets (econclassroom.com 21:23) Review:
Long Run Equilibrium A normal profit (zero economic profits) is what we would expect individual firms in a perfectly competitive market to earn in the long run because there are no barriers to entry. Why do perfectly competitive firms only earn a normal profit in the long run?
8b - Allocative and Productive Efficiency in Perfectly
Competitive Markets (econclassroom.com 19:35) Introduction
Review
How Perfectly Competitve Marlkets achieve Productive Efficiency in the long Run
How Perfectly Competitve Markets achieve Allocativetive Efficiency in the long Run
Perfectly competitive firms achieve both productive and allocative efficiency in long run equilibrium
At what output level would a perfectly competitive firm produce?The profit-maximizing choice for a perfectly competitive firm will occur at the level of output where marginal revenue is equal to marginal cost—that is, where MR = MC.
What is the perfectly competitive output?A perfectly competitive firm can sell as large a quantity as it wishes, as long as it accepts the prevailing market price. If a firm increases the number of units sold at a given price, then total revenue will increase. If the price of the product increases for every unit sold, then total revenue also increases.
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