Question

explain how a from long run equilibrium in a perfectly competition market ​

Answer 1

HEY MATE!

YOUR ANSWER:

The long run is a period of time which is sufficiently long to allow the firms to make changes in all factors of production. In the long run, all factors are variable and none fixed. The firms, in the long run, can increase their output by changing their capital equipment; they may expand their old plants or replace the old lower-capacity plants by the new higher-capacity plants or add new plant.

Moreover, the firms can leave the industry in the long run. The long-run equilibrium then refers to the situation when free and full adjustment in the capital equip­ment as well as in the number of firms has been allowed to take place.

It is therefore long-run average and marginal cost curve which are relevant for deciding about equilibrium output in the long run. Moreover, in the long run, it is the average total cost which is of determining importance, since all costs are variable and none fixed.

As explained above, a firm is in equilibrium under perfect competition when marginal cost is equal to price. But for the firm to be in long-run equilibrium, besides marginal cost being equal to price, the price must also be equal to average cost.

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Answer 2

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