When in a purely competitive industry is in long run equilibrium, what equality is true? What...

When in a purely competitive industry is in long run equilibrium, what equality is true? What kind of efficiency (or efficiencies) is achieved in long run equilibrium and what equality represents the efficiency (or efficiencies)?

Expert Solution

In a purely competitive industry in the long run, price, marginal cost, marginal revenue and average total cost all are equal. This leads to market being economic efficient, i.e. the market is both allocative and productive efficient.

A market achieves allocative efficiency when the value of the goods produced in the market is equal to the value what the consumer assign to that good, here, the price and marginal cost are both equal. A firm achieves productive efficiency when they are producing at the lowest point of the ATC, this means there is no wastage in the economy.

Rahul Sunny answered 2 years ago

For purely competitive industry, in long-run equilibrium, MR = P = minimum ATC = MC. Answer...

For purely competitive industry, in long-run equilibrium, MR = P = minimum ATC = MC. Answer the following and distinguish between productive efficiency and allocative efficiency in your answer. A. Of what significance for economic efficiency is the equality of P and minimum ATC? B. What is the importance of the equality of P and MC?

If a perfectly competitive industry is in long-run equilibrium, then which of the following is true?...

If a perfectly competitive industry is in long-run equilibrium, then which of the following is true? a)Price equals minimum average cost. b)Price equals minimum marginal cost c)Accounting profits for all firms are zero d)Economic profits for all firms are positive

Q7. A competitive industry is in long-run competitive equilibrium when the price of a complement good...

Q7. A competitive industry is in long-run competitive equilibrium when the price of a complement good (in consumption) decreases. What will happen in the short run to: a) The market demand curve? b) The market supply curve? c) Market price? d) Market output? e) The firm’s output? f) The firm’s profit? b. What will happen in the long run to the firm and the industry? Q8. The supply curve for an industry shows the relation between supply price and industry...

What is the long run equilibrium price in a percectly competitive industry ?

Long Run Competitive Equilibrium and a firm’s SupplyDecisions:Will firms in a competitive industry continue...

Long Run Competitive Equilibrium and a firm’s Supply Decisions:Will firms in a competitive industry continue to earn a positive economic profit in the long run? Explain why or why not using the assumption of free entry and exit in a competitive market.Why may it be optimal for a firm to incur losses in the short run but not in the long run? Under what conditions will a firm choose to shut down?

Diagram a purely (product market) competitive firm in long-run equilibrium. Be sure to show both the...

Diagram a purely (product market) competitive firm in long-run equilibrium. Be sure to show both the market and the representative firm. Next, on the same diagram, show what happens to the market and the representative firm if the market demand for the product falls dramatically, for instance, due to bad press. Briefly explain your conclusions. Please show me your thought process. Please explain it as if you are telling it to someone who has no clue about economics.

Suppose that a perfectly competitive industry is in long-run equilibrium. Then the price of a complementary...

Suppose that a perfectly competitive industry is in long-run equilibrium. Then the price of a complementary good decreases. Use two graphs, one for the firm, and one for the industry (and words) to explain what will happen in the short run, and then the long run, to: a. The market demand curve? b. The market supply curve? c. Market price? d. Market output? e. Representative firm output? f. Representative firm profit?

Assume that the oil industry is in a long-run competitive equilibrium at a price of $100...

Assume that the oil industry is in a long-run competitive equilibrium at a price of $100 per barrel, and that the oil industry is constant-cost. Use a carefully labeled set of two graphs to explain what would happen in the long run to the number of firms and to the production of each firm as a result of the drop in price from $100 to $76, assuming it reflected a decrease in demand. Be sure to define constant-cost and describe...

Which of the following is true of a perfectly competitive firm in long-run equilibrium? A) it...

Which of the following is true of a perfectly competitive firm in long-run equilibrium? A) it will minimize its average total cost B) the market demand curve is horizontal C) the market supply curve is horizontal D) marginal cost is minimized E) it will charge a price above its marginal cost

When a purely competitive firm earns a normal economic total profit in the long run, it...

When a purely competitive firm earns a normal economic total profit in the long run, it produces a quantity Q of its final product where $Price = $Marginal Cost and also $Price = Minimum Average Total Cost. Why are these price and cost equalities considered to be beneficial for the entire economy?

Question