Perfect competition in the long run
![]() Everything You Need in One PlaceHomework problems? Exam preparation? Trying to grasp a concept or just brushing up the basics? Our extensive help & practice library have got you covered. | ![]() Learn and Practice With EaseOur proven video lessons ease you through problems quickly, and you get tonnes of friendly practice on questions that trip students up on tests and finals. | ![]() Instant and Unlimited HelpOur personalized learning platform enables you to instantly find the exact walkthrough to your specific type of question. Activate unlimited help now! |
Make math click 🤔 and get better grades! 💯Join for Free

Get the most by viewing this topic in your current grade. Pick your course now.
Intros
Lessons
- Perfect Competition in the Long Run Overview:
- Long Run: Entry & Exit
- Short-run equilibrium → economic loss, profit, or breaks-even
- Long-run equilibrium → firm always breaks-even
- Firm incentive to enter market when p > ATC
- Firm exits market when p < ATC
- Long-Run: Changes to Demand
- Firm starts by making zero profit
- Increase in Demand → Economic profit
- Firms enter market → increase in supply until firms break-even
- Decrease in Demand → Economic Loss
- Firms exit market → decrease in supply until firms break-even
- Long-Run: Changes to Supply as Technology Advance
- Firms start by making zero profit
- Technology advance decrease MC & ATC → economic profit
- Firms enter market → increase in supply until firms break-even
Examples
Lessons
- Predicting Prices for Exiting & Entering the Market
Suppose the market is perfectly competitive, and you are given the following graph:Output
Total Cost
0
5
1
12
2
17
3
24
4
33
5
44
- Suppose the market is perfectly competitive, and you are given the following information
Output
Total Cost
0
8
1
16
2
22
3
30
4
40
5
52
- Understanding Changes to Demand and Supply in the Long Run
Suppose the equilibrium price and quantity is that the shutdown point. If there is an increase in demand, does that automatically assume there is economic profit? - All the firms are currently breaking even. Suppose a natural disaster destroys all the firm's low-cost plant. All the firms now must switch to a high-cost plant. Describe what happens to the marginal cost, average total cost. Do the firms still breakeven? What happens to the market in the long run? Show this graphically.