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: Pure Competition: Long-Run Equilibrium
Pure Competition: Long-Run Equilibrium
In the long run, firms can enter or exit a purely competitive market easily. Pure competition also assumes that firms and resources can be easily reallocated in response to demand. Hence, if economic profits are being made by the firms within the industry, then more firms will enter the market, thereby lowering the market price to the equilibrium price and quantity that allows only normal profits. If the firms are suffering losses, then some firms will leave the market, reducing the market supply, thereby increasing prices, which will allow the existing firms to earn a normal profit. The long-run market price equals the minimum average total cost ( ATC) of producing the product. And since suppliers will produce until marginal cost = market price, the long-run equilibrium in a purely competitive market can be summarized thus: Average Total Cost = Marginal Cost = Market Price
A firm maximizes profit when it's marginal revenue ( MR) equals its marginal cost ( MC) equals the average total cost ( ATC ). For a competitive firm, MR equals the market price.