Title: Pure Competition: Long-Run Equilibrium
Headings: Pure Competition: Long-Run Equilibrium
Pure Competition: Long-Run Equilibrium
Average Total Cost = Marginal Cost = Market Price
Productive And Allocative Efficiency Under Pure Competition

Content: Long-run supply curves for a constant-cost industry, increasing-cost industry, and a decreasing-cost industry. As demand increases from D 1 to D 3, the supply increases for a constant-cost industry, but the price remains constant. Increasing-cost industries depend on scarce resources, so prices generally increase as demand increases. For decreasing-cost industries, economies of scale help to reduce costs with increasing volume. Hence, prices decline as supplies increases with increased demand. Productive And Allocative Efficiency Under Pure Competition
Productive efficiency requires that products be produced for the minimum cost. When productive efficiency is achieved, price = minimum average total costs. Therefore, any firm that cannot produce at the minimum ATC will be forced to leave the industry. If a firm is more productive in producing a certain product, with average total costs lower than the industry average, then they can increase output continually until either other firms achieve similar efficiency or they are forced out. Hence, firms that use the best technology and methods will achieve the lowest average total costs, thereby providing the lowest possible price for the product.