Long run in the pc Flashcards
The PC firm making abnormal profits in the short run
Will cause other firms to enter the industry since there are no barriers to entry, this would result in an increase in market supply and a decrease in the price of the good from P–>P1
Since PC firms are price takers
the firm will take new price set by the market P1, hence the D=MR=AR curve shifts to D1=MR1=AR1 until normal profits are being made
The PC curve making losses in the short run
Will cause other firms to exit the industry since there are no barries to exit this would result in a decrease in the market supply of the good and an increase in the price of the good
Since PC firms are price takes (losses)
The firm will take the new price set by the market so the curve will shift upwards until normal profits are being made in the long run
The marginal cost curve
Gives the price the producer would be willing to accept for different quantities of the g/s he produces, the marginal cost curve is the supply curve of the firm that operates under perfect competition