Unit 3: Are Businesses Efficient? Product Markets and Efficiency

Lesson 8/9b: Pure Competition: Long Run Equilibrium and Efficiency

Something Interesting - Why are we studying this?

Why will purely competitive firms always earn zero economic profits (called normal profits) in the long run? - WATCH: Micro 3.10 Perfect Competition in the Long Run- AP Micro (ACDC 2:04) - ANSWER: because there are no barriers to entry Why are zero economic profits good (or at least OK)? - WATCH: Economic Profit and Costs- ACDC Econ - Micro 3.6 (3:47) - ANSWER: because economists include implict costs when they calculate total costs (i.e. you pay yourself as much as you could have made in your next best opportunity).

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