q*LRMCSRACSRMCP = MR = DemandLRACQ$Long Run Equilibrium Perfect Competition in the Long RunHandoutSummary of the firm in long run equilibrium1. In the long run, every competitive firm will earn normal profit, that is, zero profit.2. In the long run, every competitive firm will produce where price (P) is equal to marginal cost(MC), that is where P = MC.3. In the long run, every competitive firm will produce where price (P) is equal to the minimumof short run average cost (SRAC), P = SRAC. This implies zero economic profit.4. In the long run, every competitive firm will produce where price (P) is equal to the minimumof long run average cost (LRAC = ATC), P = minimum LRAC. This implies that noidentical firms will want to enter or exit. 5. Putting it all together:P = MC = min SRAC = min LRAC6. Graphically this givesData Table for Competition in the Long Runy Price TR MR C ATC MC Profit SRAC 5SRMC 5 SRAC 9SRMC 9SRAC 15SRMC 15SRAC 18SRMC 18SRAC 23SRMC 230.00 292 0 292 0.00 0.00 1.00 292 292 292 371.00 371.00 343.00 -79.00 851.00 103.00 2291.00 6251.00 9041.00 14891.00 2.00 292 584 292 688.00 344.00 292.00 -104.00 479.00 112.00 1079.00 2879.00 4184.00 6959.00 3.00 292 876 292 957.00 319.00 247.00 -81.00 359.00 127.00 679.00 1759.00 2569.00 4319.00 4.00 292 1168 292 1184.00 296.00 208.00 -16.00 303.50 148.00 483.50 1203.50 1766.00 3003.50 5.00 292 1460 292 1375.00 275.00 175.00 85.00 275.00 175.00 371.00 875.00 1289.00 2219.00 6.00 292 1752 292 1536.00 256.00 148.00 216.00 261.00 208.00 301.00 661.00 976.00 1701.00 7.00 292 2044 292 1673.00 239.00 127.00 371.00 256.14 247.00 256.14 7.00 513.29 757.57 1336.14 8.00 292 2336 292 1792.00 224.00 112.00 544.00 257.75 292.00 227.75 52.00 407.75 599.00 1067.75 9.00 292 2628 292 1899.00 211.00 103.00 729.00 264.33 343.00 211.00 103.00 331.00 481.00 864.33 10.00 292 2920 292 2000.00 200.00 100.00 920.00 275.00 400.00 203.00 160.00 275.00 392.00 707.00 11.00 292 3212 292 2101.00 191.00 103.00 1111.00 289.18 463.00 201.91 223.00 234.64 324.64 583.73 12.00 292 3504 292 2208.00 184.00 112.00 1296.00 306.50 532.00 206.50 292.00 206.50 274.00 486.50 13.00 292 3796 292 2327.00 179.00 127.00 1469.00 326.69 607.00 215.92 367.00 188.23 7.00 236.69 409.77 14.00 292 4088 292 2464.00 176.00 148.00 1624.00 349.57 688.00 229.57 448.00 178.14 88.00 210.29 349.57 15.00 292 4380 292 2625.00 175.00 175.00 1755.00 375.00 775.00 247.00 535.00 175.00 175.00 193.00 303.00 16.00 292 4672 292 2816.00 176.00 208.00 1856.00 402.88 868.00 267.88 628.00 177.88 268.00 183.50 88.00 267.88 17.00 292 4964 292 3043.00 179.00 247.00 1921.00 433.12 967.00 291.94 727.00 186.06 367.00 180.76 187.00 242.53 18.00 292 5256 292 3312.00 184.00 292.00 1944.00 465.67 1072.00 319.00 832.00 199.00 472.00 184.00 292.00 225.67 19.00 292 5548 292 3629.00 191.00 343.00 1919.00 500.47 1183.00 348.89 943.00 216.26 583.00 192.58 403.00 216.26 103.00 20.00 292 5840 292 4000.00 200.00 400.00 1840.00 537.50 1300.00 381.50 1060.00 237.50 700.00 206.00 520.00 213.50 220.00 22.00 292 6424 292 4928.00 224.00 532.00 1496.00 618.09 1552.00 454.45 1312.00 290.82 952.00 245.82 772.00 225.36 472.00 23.00 292 6716 292 5497.00 239.00 607.00 1219.00 661.61 1687.00 494.65 1447.00 322.48 1087.00 271.61 907.00 239.00 607.00 25.00 292 7300 292 6875.00 275.00 775.00 425.00 755.00 1975.00 582.20 1735.00 395.00 1375.00 333.80 1195.00 279.80 895.00 26.00 292 7592 292 7696.00 296.00 868.00 -104.00 804.85 2128.00 629.46 1888.00 435.62 1528.00 369.85 1348.00 306.38 1048.00 28.00 292 8176 292 9632.00 344.00 1072.00 -1456.00 910.79 2452.00 730.79 2212.00 525.07 1852.00 451.14 1672.00 370.79 1372.00 30.00 292 8760 292 12000.00 400.00 1300.00 -3240.00 1025.00 2800.00 841.00 2560.00 625.00 2200.00 544.00 2020.00 449.00 1720.00QD 670 P< P 670 QDConsider an industry with 21 firms, each having a cost structure as on the previous page. The industrydemand is given byIndividual Firm Supply, Price, Cost, and Average Cost - Size 18 Planty* Supply Price - 1 Firm Cost AC16.941074 181.00 3062.16 180.75 17 187.00 3073.00 180.76 17.204651 208.00 3113.41 180.96 17.606817 250.00 3205.48 182.06 18 292.00 3312.00 184.00 19 403.00 3659.00 192.58 20 520.00 4120.00 206.00 21 643.00 4701.00 223.86 22 772.00 5408.00 245.82 Market and Individual Firm Supply, Supply Price, Average Cost and Demand Price - Size 18 PlantQ y* Supply Price - 21 Firms AC Demand Price355.76 16.941074 181.00 180.75 314.24 357.00 17 187.00 180.76 313.00 361.30 17.204651 208.00 180.96 308.70 369.74 17.606817 250.00 182.06 300.26 378.00 18 292.00 184.00 292.00 399.00 19 403.00 192.58 271.00 420.00 20 520.00 206.00 250.00 441.00 21 643.00 223.86 229.00 462.00 22 772.00 245.82 208.00 Market and Individual Firm Supply, Supply Price, Average Cost and Demand Price - Size 18 PlantQ y* Supply Price - 26 Firms AC Demand Price440.47 16.941074 181.00 180.75 229.53 442.00 17 187.00 180.76 228.00 447.32 17.204651 208.00 180.96 222.68 450.33 17.320508 220.00 181.18 219.67 457.78 17.606817 250.00 182.06 212.22 468.00 18 292.00 184.00 202.00 494.00 19 403.00 192.58 176.00 520.00 20 520.00 206.00 150.00 546.00 21 643.00 223.86 124.00 572.00 22 772.00 245.82 98.00 Market and Individual Firm Supply, Supply Price, Average Cost and Demand Price - Size 15 PlantQ y* Supply Price - 26 Firms AC Demand Price390.00 15 175.00 175.00 280.00 397.72 15.297059 202.00 175.26 272.28 413.01 15.885003 257.00 177.26 256.99 416.00 16 268.00 177.88 254.00 422.45 16.248077 292.00 179.43 247.55 442.00 17 367.00 186.06 228.00 468.00 18 472.00 199.00 202.00 494.00 19 583.00 216.26 176.00 520.00 20 700.00 237.50 150.00papaS1D1LRACLRMCLong-run Supply Curve in a Constant-cost Industry 0Q$q$aQaSRAC SRMCqbD2b£bQbS2Long-run supplypbpbqadceSRMC1qaLong-run Supply Curve in an Increasing-cost Industry paa0Q$qS1D1$paQaD2pbpbqbb£cQcS2Long-run supplyLRAC1pcLRAC2SRMC2pcS3QbbpapaqaLRAC1SRMC1b£D2Long-run Supply Curve in a Decreasing-cost Industry 0Q$q$pcpcS1D1LRAC3cQcS3Long-run
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