Draw the short-run and long-run cost curves for a competitive firm in long-run equilibrium....


Draw the short-run and long-run cost curves for a competitive firm in long-run equilibrium. Indicate the long-run equilibrium price and quantity.

a. Discuss the firm's short-run response to a reduction in the price of a variable resource.

b. Assuming that this is a constant cost industry, describe the process by which the industry returns to long-run equilibrium following a change in market demand.

Perfect competition

Perfect competition is When multiple firms are capable of producing identical products that there is sufficient demand, and those firms are unable to collude ,they will all attempt to drive each other out of business, either by gaining 100% of the market share or by making it otherwise impossible for the competition to survive.

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In Figure-1, X axis measures the quantity and Y axis measures the price. LRAC curve represents long-run average cost. ATC curve represents...

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Perfect Competition in Economics & Adam Smith's 'Invisible Hand'


Chapter 7 / Lesson 1

Perfect competition is perpetuated in regulated economic market systems, as the concept of the 'invisible hand,' devised by Adam Smith, keeps supply and demand lines in check. Learn more about these concepts, the five requirements for a perfectly competitive market, and market equilibrium, seeing applications of each through examples.

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