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  • Long-Run Market Dynamics of Entry, Exit, and Capacity Change

Long-Run Equilibrium in a Competitive Market

A long-run equilibrium in a competitive market is the state reached when rent-seeking and competition have eliminated less-efficient firms and driven economic rents to zero, thereby halting the entry of new firms or the expansion of existing ones. In this equilibrium, the remaining firms produce at a low average cost that is approximately equal to the market price, resulting in them earning only normal profits. This market state is stable and will persist unless it is disrupted by an exogenous supply or demand shock.

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References

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Social Science

Empirical Science

Science

Economy

CORE Econ

Economics

Introduction to Microeconomics Course

The Economy 2.0 Microeconomics @ CORE Econ

Ch.8 Supply and demand: Markets with many buyers and sellers - The Economy 2.0 Microeconomics @ CORE Econ

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Learn After

  • Elimination of Inefficient Firms and Economic Rents via Competition

  • Stability of Long-Run Equilibrium Pending Exogenous Shocks

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