ECON 2001.01 Lecture Notes - Lecture 9: Economic Equilibrium, Allocative Efficiency, Productive Efficiency

• School: Ohio State University
• Department: Economics
• Course: ECON 2001.01
• Professor: Mirzaie Ida

Document Summary

Chapter 9: pure competition in the long run. In the short run, the firm shutting down just means that it stops producing any output, but it"s not out of business, it"s just temporarily stopping production. In the long run it has time to go out of business. Firms have enough time to expand or contract their capacities in the long run. There is no set time for the long run, it isn"t a certain length. Focus on the incentives by the profits and losses for entry and exit of firms into the industry. Long run: entry and exit and the effects on the industry and the allocative( how to best distribute the resources) and productive (how to do it as cheap as possible) efficiency. Entry and exit only: long run adjustment is caused by entry or exit of firms. Identical costs: all firms have identical cost curves.