"In a competitive environment where there are no barriers to entry or exit by firms and all firms are identical, a typic

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In A Competitive Environment Where There Are No Barriers To Entry Or Exit By Firms And All Firms Are Identical A Typic 1 (226.6 KiB) Viewed 36 times

"In a competitive environment where there are no barriers to entry or exit by firms and all firms are identical, a typical firm's short-run profit level is a good indicator of what will happen in the long-run. If a firm is making "supernormal" profits in the short run, this attracts new firms to enter this industry until the increased competition squeezes a typical firm's economic profit to zero at which point entry ceases since a typical firm only makes normal profits (zero economic profits). Conversely, if a typical firm is making losses in the short-run and this situation persists indefinitely, then eventually firms begin to exit the industry until the reduced competition raises a typical firm's economic profits to zero." Banerjee . A typical perfectly competitive firm's long-run total cost function is LRTC = 1/3q3 – 18q2 + 120q LRMC q? – 369 + 120 What level of output will this firm produce when it is earning zero economic profit in the long-run? What is the long-run equilibrium price in the market. If there are 1,000 firms in this competitive industry determine the total industry output when it is at a long-run competitive equilibrium? . .