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Long Run Equilibrium definitions

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  • Long Run Equilibrium
    Market condition where price equals minimum average total cost and firms earn zero economic profit after all adjustments.
  • Average Total Cost
    Total cost per unit of output, minimized in long run equilibrium, setting the benchmark for market price.
  • Economic Profit
    Surplus earned when price exceeds average total cost, eliminated in the long run by market entry or exit.
  • Demand Curve
    Graphical representation showing how quantity demanded changes with price, shifting right with increased demand.
  • Supply Curve
    Graphical representation showing how quantity supplied changes with price, shifting right as new firms enter.
  • Marginal Cost
    Additional cost incurred from producing one more unit, intersecting marginal revenue at optimal output.
  • Marginal Revenue
    Additional revenue from selling one more unit, equal to price in perfect competition.
  • Perfect Competition
    Market structure with many firms, identical products, and free entry, ensuring zero economic profit in the long run.
  • Short Run Equilibrium
    Temporary market state where firms may earn profits or losses before entry or exit restores long run equilibrium.
  • Market Entry
    Process where new firms join the industry, increasing supply and driving profits toward zero.
  • Market Exit
    Process where firms leave the industry, reducing supply and eliminating losses.
  • Minimum ATC
    Lowest point on the average total cost curve, setting the long run equilibrium price.
  • Quantity Supplied
    Total amount of goods offered by firms at a given price, rising as demand and market entry increase.
  • Equilibrium Price
    Market price where supply equals demand, returning to minimum average total cost after adjustments.
  • Zero Economic Profit
    Outcome where total revenue equals total cost, achieved in the long run as market supply adjusts.