ECON 201 1st Edition Lecture 10 I Market and Firms in a Competitive Economy A Long run competitive equilibrium Always start here home B Suppose Demand Increases Short run questions 1 What happens to market price i Goes up 2 What happens to market quantity i Goes up 3 What happens to firm level output i MR MC always start here ii Goes up 4 What happens to firm level profits in the short run i Goes up ii ATC doesn t move 5 How does the number of firms change These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute i In the short run the number of firms does not change Long run questions shock firms can enter and exit 6 What happens to the number of firms i Increases 7 What happens to the firm profits as more firms participate i Return to 0 8 What happens to firm level output relative to the short run equilibrium i MR MC ii Each firm produces less relative to the short run 9 What happens to firm level output relative to the initial long run equilibrium i Did not change 10 What happens to market quantities i Any market will equilibrate when D S ii Demand shifted to the right then in long run supply shifted to the right iii Quantity went up 11 What happens to the market price relative to its initial long run equilibrium i Profit goes back to 0 ii Changes nothing it goes right back where it was initially C Suppose there is a reduction in demand MR MC Firm level output drops Price went down but cost stays the same Making negative profits Short run the number of firms do not change o Can t break contracts or leases have to pay fixed cost in short run o Can make negative profits Supply shifts left Can ramp production up to their original levels For exam it will be going through the short run and long run market questions
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