Long run equilibrium for the firm, Managerial Economics

Assignment Help:

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


Related Discussions:- Long run equilibrium for the firm

How government intervenes to improve allocation of resources, Problem 1: ...

Problem 1: You are the manager of a reputed five star hotel in Mauritius and you have been asked by the director of the hotel to advise on possible pricing strategies to increa

What are the essential conditions for perfect completion, What are the esse...

What are the essential conditions for perfect completion? Two essential conditions for perfect competition are as given below: a. Various producers, none of whom have a hug

Bank deposit and credit creation, Bank Deposit Bank notes and coins to...

Bank Deposit Bank notes and coins together constitute the currency in circulation.  But they form only a part of the total money supply.  The larger part of the money supply i

Agency problems, agency problems between shareholders and government

agency problems between shareholders and government

Managerial economic, gap between economic theory and business practice

gap between economic theory and business practice

Investment demand theory , In the national income analysis, investment ref...

In the national income analysis, investment refers to the value of than part of the aggregate output for any given time period which takes the form of construction of new structure

Eceonomic therios, Ask questiHow does economic theory contribute to manager...

Ask questiHow does economic theory contribute to managerial decisions? on #Minimum 100 words accepted#

Marijuana, Plot the demand schedule and draw the demand curve for the data ...

Plot the demand schedule and draw the demand curve for the data given for Marijuana in the case above.

MBA, different types of markets and role in managerial economics

different types of markets and role in managerial economics

Role of scarcity in economic decision making, Explain the role scarcity of ...

Explain the role scarcity of resources plays in economics decision making

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd