The Long-Run Adjustment Process
Starting from Economic Profit
Starting from Economic Loss
Entry shifts market supply right → price falls → profits eliminated
Long-Run Equilibrium Conditions
Long-run equilibrium: P = MC = min ATC → allocative + productive efficiency + zero economic profit
Allocative Efficiency
- •
- •
- •
Productive Efficiency
Why Zero Economic Profit?
Constant-Cost, Increasing-Cost, and Decreasing-Cost Industries
Efficiency Summary
AP Exam Tips
- •
- •
- •
- •
Common Mistakes
- •
- •
- •
- •
Unit 3 topics
Unit 3 overview3.1The Production Function3.2Short-Run Production Costs3.3Long-Run Production Costs3.4Types of Profit3.5Profit Maximization3.6Firms' Short-Run Decisions to Produce and Long-Run Decisions to Enter or Exit3.7Perfect Competition3.8Long-Run Equilibrium and Efficiency in Perfect Competition