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Lecture 16

Lecture 16-Perfect Competition Revisited


Department
Economics
Course Code
ECO101H1
Professor
Jack Carr
Lecture
16

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Perfect Competition Revisited
Long Run Industry Supply Curve
1. After economic profits are driven to zero by entry or exit, what is the relationship
between price and quantity supplied?
OR
2. How does (minimum) ATC vary as the number of firms in the industry increases
or declines?
The Long-Run Industry Supply Curve
Horizontal Ù New firms have same cost structures as existing firms
Upward-Sloping Ù New firms bid up cost of factors of production for all firms
OR
New firms are less efficient and have higher costs of
production
Case #1: All firms have identical cost schedules
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Case #2: New Entrants have higher costs
P
Long Run
Industry SS
Q
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Long Run
Industry SS
Q
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