Figure 9-12 A Typical Competitive Firm When the Industry Is in Long-
Run Equilibrium
industry is in long-run equilibrium. Because marginal cost equals price,
no firm can improve its profits by varying its output in the short run.
Because each firm is at the minimum point on its LRAC curve, there is no
incentive for any existing firm to alter the scale of its operations. Because
there are neither profits nor losses, there is no incentive for entry into or
exit from the industry.
In long-run competitive equilibrium, each firm is operating at the
minimum point on its LRAC curve. In long-run equilibrium, each firm
must be (1) maximizing short-run profits, (2) earning profits of
zero on its existing plant, and (3) unable to increase its
profits by altering the scale of its operations. These three conditions can
be met only when the firm is at the minimum point on its LRAC curve,
with price and output
In long-run competitive equilibrium, each firm’s average cost of production is the lowest
attainable, given the limits of known technology and factor prices.MC=p;
SRATC=p;p* Qm.