Question

What do you understand by equilibrium of an industry?

Answer 1

Answer:

A firm is said to be in equilibrium when it has no incentive either to expand or to contract its output. A firm would not like to change its level of output only when it is earning maximum money profits. Hence, making a maximum profit or incurring a minimum loss is an important condition of a firm's equilibrium.

Answer 2

The equilibrium of an industry is a condition when the new firm does not enter and exit.

What are the conditions of equilibrium of an industry?

Short-run equilibrium of the industry-

• In the short-run period, the output of the industry depends upon the production of the industry
• Total cost and total revenue curves represent the short-run equilibrium of the industry

Long-run equilibrium of the industry-

• In long-run there are more possibilities of adjustment than the short-run
• The efficiency of all industries are equal and the cost curve of industries are constant