5 Steps to a 5 AP Microeconomics, 2014-2015 Edition

124 › Step 4. Review the Knowledge You Need to Score High

P=MR =MC =ATC, each carrot farmer is now breaking even with P=0. Would the

next potential carrot farmer enter the market? Unlikely, as the entry of one more firm

pushes the price down just enough to where losses are actually incurred. Thus, this

breakeven point is described as the long-run equilibrium. The market quantity has

increased, and each firm produces less at the lower price. Figure 9.7 illustrates the move-

ment toward the long-run equilibrium.

• Entry of new firms attracted by economicThe long-run adjustment to short-run positive profits can be summarized as:P>0.


• Increase in market supply.


• A decrease in the market price to PLR.


• Profits fall to the breakeven point, PLR=MR =MC =ATC and economicP=0.


• Market quantity increases.


• Individual producer output falls.

AVC

S = ΣMC

D

Quantity Quantity

Pe Pe d = Pe = MR = AR

$P $P

The U.S. Carrot Market One Carrot Producer

Qe qe

MC

AT C

Profit > 0

Figure 9.6

PLR AVC

S = ΣMC

D

Quantity Quantity

Pe Pe d = Pe = MR

$P The U.S. Carrot Market $P One Carrot Producer

Qe qLRqe

MC

AT C

PLR

QLR

Figure 9.7

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