ECON 1050 Chapter Notes - Chapter 12: Social Cost, Perfect Competition

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burgundywolf182

4 Dec 2016

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Market demand and short-run market supply determine the market price and market output. Changes in demand bring changes to short-run market equilibrium. In short-run equilibrium, although the firm produces the profit maximizing output, it does not necessarily end up making an economic profit. It"s all based on if price is less than, more than, or equal to atc in the equation: Economic profit/loss = (price atc) x q. In short-run equilibrium, a firm might make an economic profit, incur an economic loss or break even. Only one of these 3 situations is a long-run equilibrium because in the long-run firms can enter/exit the market. Entry new firm(s) enter a market and the total number of firms increases. Exit existing firm leaves market and the total number of firms decreases. Firms enter a market because existing firms are incurring economic profit and exit a market if they"re incurring economic loss.

Related Questions

In a competitive market with identical firms:

1. free entry and exit into the market requires that firms earn zero economic profit in the long run even though they may be able to earn positive economic profit in the short run.

2. firms can earn positive economic profit in the long run if the long-run market supply curve is upward sloping.

3. an increase in demand in the short run will result in a new price above the minimum of average total cost, allowing firms to earn a positive economic profit in both the short run and the long run.

4. firms cannot earn positive economic profit in either the short run or long run.

fuchsiaraccoon523

In a competitive market with identical firms:

a. free entry and exit into the market require that firms earn zero economic profit in the long-run even though they may be able to earn positive economic profit in the short-run.

b. firms can earn positive economic profit in the long-run if the long-run market supply curve is upward-sloping.

c. an increase in demand in the short-run will result in a new price above the minimum average total cost, allowing firms to earn a positive economic profit in both the short-run and long-run.

d. firms cannot earn positive economic profit in either the short-run or long-run.

salmonbuffalo772

In a competitive market with identical firms,

a.; free entry and free exit into the market require that firms earn zero economic profit in the long run even though they may be able to earn economic profits in the short run.

b. firms can earn economic profits in the long run if the long-run supply curve is upward sloping

c. an increase in demand in the short run will result in a new price above the minimum of the average total cost allowing the firms to earn a positive economic profit in both the short run and the long run

d. firms can earn a positive economic profit in either the short run or the long run.

pinkwombat37

ECON 1050 Chapter Notes - Chapter 12: Social Cost, Perfect Competition

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