TOPICS
- Pure Competition - long
run equilibrium
- Pure Competition and Efficiency
- Marginal Cost Pricing
OUTCOMES
Explain the difference
between the short run and the long run..
Explain the shape of long run
industry supply curves in constant cost, increasing cost,
and decreasing cost industries.
Differentiate between productive
and allocative efficiency.
Explain why allocative efficiency
and productive efficiency are achieved where P = minimum
ATC = MC.
Understand the adjustment process
from the short run to the long run caused by the entry
and exit of firms. Explain the role of barriers to entry
and profits. Why do competitive
firms earn zero economic profits in the long
run?
Draw the long run equilibrium
graph for a purely competitive firm and indicate the
profit maximizing quantity, the allocatively efficient
quantity, and the productively efficient
quantity.
Discuss the economic effects of
pure competition on allocative efficiency, productive
efficiency, dynamic efficiency (technological progress),
X-efficiency, and distribution of income
(equity).
How do you find the profit
maximizing quantity?
How do you find the allocatively
efficient quantity?
How do you find the productively
efficient quantity?
Explain why allocative efficiency
occurs where P = MC (MSB=MSC; when consumer plus producer
surplus is maximized)
What is creative destruction in
purely competitive industries
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