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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 16: Perfect Competition | Unit 5: Evaluation Page: 27 of 28

Topic: Market Control <=PAGE BACK | PAGE NEXT=>

  • Market control.

  • Market control is the ability of a firm to control the price and/or quantity of the good sold.
  • Most real world firms are not price takers. They have some degree of market control.

  • What does this mean?

    • First, because many firms in the real world have some degree of market control, they have the ability to charge a price that is a little more (or a lot more) or a little less (or a lot less) than the going market price.

    • Second, real world firms with market control do not have equality between price and marginal revenue.

    • Third, the inequality between price and marginal revenue means that profit-maximizing firms that equate marginal revenue and marginal cost do NOT equate price and marginal cost.

    • Fourth, perfect competition is most important in evaluating the degree of inefficiency of real world firms.


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AUCTION

A formal market exchange in which prospective buyers make bids to purchase a commodity. An auction is an effective way of exchanging commodities by bringing together buyers and sellers. Auctions are commonly used to exchange financial instruments, agricultural commodities, personal assets, and works of art. Three notable types of auctions are English, Dutch, and sealed-bid.

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Today, you are likely to spend a great deal of time at the confiscated property police auction hoping to buy either a pair of leather sandals that won't cause blisters or clothing for your kitty cats. Be on the lookout for a thesaurus filled with typos.
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"And while the law of competition may be sometimes hard for the individual, it is best for the race, because it ensures the survival of the fittest in every department. "

-- Andrew Carnegie, entrepreneur

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