Long run equilibrium for the firm, Managerial Economics

LONG RUN EQUILIBRIUM FOR THE FIRM

Since there is freedom of entry into the industry the surplus profits will attract new firms into the industry.  As a result the supply of the product will increase and the price will fall.  The individual firm will face a falling perfectly elastic demand curve, and the surplus profits will be reduced. 

1488_long run equilibrium.png

This will go on until the firm is no longer making surplus profits, i.e. when it is just covering its production costs.  At this stage no more firms will be attracted to the industry.  This will happen when the price is equal to the average cost and the demand curve is tangent to the average cost curve at the minimum point.  The firm is said to be making normal profits.

345_long run equilibrium1.png

Posted Date: 11/28/2012 5:09:13 AM | Location : United States







Related Discussions:- Long run equilibrium for the firm, Assignment Help, Ask Question on Long run equilibrium for the firm, Get Answer, Expert's Help, Long run equilibrium for the firm Discussions

Write discussion on Long run equilibrium for the firm
Your posts are moderated
Related Questions
Q. Explain the Short run production function? Discussion of production up to now has ignored the time required to build production facilities. There is a requirement to take in

Market Structures This refers to the nature and degree of competition within a particular market.  Capitalist economies are characterised by a large range of different market

What are the Methods of Managerial Economics The process of managerial economics deals with aspects of economics and tools of analysis, which are employed by business enterpri

show how scarcity and opportunity cost are useful in decisionmaking

a) What do you understand by equilibrium National Income and to what extent is economic growth beneficial to an economy? b) Explain using both diagrams and mathematical tools,

WASTE IN IMPERFECT COMPETITION Monopolistic competition involves some degree of waste in two aspects. When new firms enter the industry and the demand for the individual fi


what are the examples of the types of elasticity (price,income & cross elaticity

State the Fixed factor of production Input level of a fixed factor can't be varied in the short run. Capital falls under the category of fixed factor. Capital alludes to resour

Q. What is Right Angled Isoquant? This presumes zero substitutability of factors of production. There is just one method of producing any one commodity. In this case, isoquant