Free entry and exit is the key to understanding long run equilibrium for perfect competition. Recall that our definition of economic profit meant that if a firm is profitable the owners are earning more than in their next best alternative. In this sense a profitable industry is a better than average investment so new firms will enter since there are no barriers to entry. If firms are suffering losses some will exit the industry to seek other opportunities since there are no exit barriers.
Long run equilibrium for a perfectly competitive industry means that profits are zero, which is the same as saying that P = ATC where ATC is at its minimum.
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