Long Run Equilibrium for Typical Firm and Industry - Zero Profits

   Profits and losses are the incentives for entry and exit in any industry. In perfect competition there are no entry and exit barriers. Therefore, firms will enter whenever firms in the industry are earning profits and will exit whey they are suffering losses. Thus, long run equilibrium means firms are earning zero profits as shown here.

Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved