Question

In: Economics

Explain how entry and exit lead to a long-run equilibrium in a competitive market. Can you...

Explain how entry and exit lead to a long-run equilibrium in a competitive market. Can you give any real-world examples of firms joining or leaving markets that you suspect are related to this adjustment process?

Solutions

Expert Solution

*when profit is mre many firms enter the market in the short run,eventually in the long run some firms incur loss and exit the marked leading to long run equilibrium.

*real world example would be rice crop.in the long run due to insufficient rain some rice firms exit from the market when they incur loss and longrun equilibrium takes place as firms earn normal profits.


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