Unit 3: Are Businesses Efficient? Product Markets and Efficiency

Lesson 8/9a: Pure Competition: Characteristics and Short Run Equilibrium

Key Problems

 

Pure Competiton - Long Run Equilibrium and Efficiency

Explain why Purely Competitive firms earn zero economic profits in the long run

Draw the long run equilibrium graph for Pure Competition

Explain why Purely Competitive firms are efficient in the long run and show the following on the graph:

- the profit maximizing quantity
- the allocatively efficient quantity
- the productively efficient quantity

 

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Lesson 8/9b