11/6 Flashcards
short run
some input is fixed ((K)apital) over some period of time so cost is fixed
long run
all inputs are variable
long run with firms
firms enter or exit, so there is a new equilibrium (Zero profit)
short run with firms
equilibrium profit, loss
production effiency is
the econ term describes level where an economy can no longer produce additional amounts of a good without lowering production level of another product
what type of efficiency is where the firm has reached the point where you are at the minimum ATC
production efficiency
-only hit by perfect competition
allocative efficiency
p=mc (perfect competition)
what type of market is allocative efficiency
where optimal distribution if goods in a economy meets the needs and wants of society
goal of allocative efficiency
ensure resources are used so that their marginal benefit to society is equal to their marginal cost
what happens to supply when firms enter
more supply
what happens to supply when firms exit
less supply
process of long run supply
1)zero profit
2)demand goes up -> profit is greater than zero
3)entry - supply goes up
4)supply increases, price decreases
….
5)price <ATC, zero profit
constant costs and increasing costs are
industries
constant costs
each firm cost arent impacted by entry or exit of new firms
increasing cost
production cost rise as the market expands