Q. 8 A perfectly competitive industry... [FREE SOLUTION]

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Chapter 23: Q. 8 (page 533)

A perfectly competitive industry is initially in a short-run equilibrium in which all firms are earning zero economic profits but in which firms are operating below their minimum efficient scale. Explain the long-run adjustments that will take place for the industry to attain long-run equilibrium with firms operating at their minimum efficient scale.

Short Answer

Expert verified

In short-run they can't change the factors to change the extent of production.

In long-runchanged in keeping with achieve minimum efficient scale within the future.

Step by step solution

Introduction

The short-run, where some factors are variable (dependent onthe number produced) be defined (yet another fees), prohibiting access and leave from eithera corporation.
The long-runis that the period whenthe final price index, contractual wage rates, and expectations adjust fully to the state of the economy.

Given Information

A perfectly competitive industry is initially in an exceedingly short-run equilibrium during which all firms are earning zero economic profits but during which firms are operating below their minimum efficient scale.

Explanation

In the short run,a wonderfully competitive industry initially operates below their minimum efficient scale. The firms earn zero economic profits becausethey can't change the factorsto change the extent of production.

In thelong term, the firms operate at their minimum efficient scale point because all the factors of productions are variable.
Factors of productionis changedin keeping with achieve minimum efficient scalewithin the future.