Exercise on Zero-Profit Condition: Solutions
Assume a LR equilibrium where the process of entry or exit is complete and remaining firms earn zero economic profit.
Questions: Write all possible formula of P when zero economic profit occur.
- Since firms produce where P = MR = MC
the zero-profit condition is P = MC = ATC
- Note that MC intersects ATC at minimum ATC
So, in the LR, P = minimum ATC
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Date of last modification: 2019