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LONG-RUN EQUILIBRIUM CONDITIONS: The long-run equilibrium of perfectly competitive industry generates six specific equilibrium conditions, including (1) economic efficiency (P = MC), (2) profit maximization (MR = MC), (3) perfect competition (MR = AR = P), (4) breakeven output (P = AR = ATC), (5) minimum production cost (MC = ATC), and (6) minimum efficient scale (MC = ATC = LRAC = LRMC).
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Lesson Contents
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Unit 1: The Exchange |
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Unit 2: The Numbers |
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Unit 3: A Graph |
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Unit 4: Adjustment |
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Unit 5: Efficiency | |
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Market
In this lesson, we'll see how buyers (discussed in the demand lesson) come together with sellers (discussed in the supply lesson) to exchange commodities using a market. More precisely, this lesson develops an abstract market model, or market analysis, that we can use to explain and understand a wide range of real world exchanges. - This lesson begins with an overview of the basic exchange process underlying markets, including the notion of equilibrium, the roles played by price and quantity, and the importance of competition.
- In the second unit we work through a simple market analysis using demand and supply schedules, highlight both equilibrium and disequilibrium conditions.
- The third unit then carefully examines the notion of market equilibrium using demand and supply curves, which generates the widely used graphical model of the market.
- Moving onto the fourth unit, we use the graphical market model to investigate the automatic market responses to shortages and surpluses.
- The lesson concludes in the fifth unit by considering the relation between market exchanges and efficiency.
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AVERAGE REVENUE CURVE, PERFECT COMPETITION A curve that graphically represents the relation between average revenue received by a perfectly competitive firm for selling its output and the quantity of output sold. Because average revenue is essentially the price of a good, the average revenue curve is also the demand curve for a perfectly competitive firm's output.
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ORANGE REBELOON
[What's This?]
Today, you are likely to spend a great deal of time at a dollar discount store seeking to buy either a remote controlled sports car with an air spoiler or semi-gloss photo paper that works with your neighbor's printer. Be on the lookout for crowded shopping malls.
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This isn't me! What am I?
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Lombard Street is London's equivalent of New York's Wall Street.
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"If you don't know where you are going, any road will get you there." -- Lewis Carroll, writer
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AFC
Average Fixed Cost
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