question
In the long run, firms already in an industry have sufficient time to either ______ or _______ their capacities
answer
expand or contract
question
More importantly, this causes the number of firms to either ________ or ________ as firms enter or leave
answer
increase, decrease
question
Length of time constituting long run varies by ________
answer
industry
question
The only graphical analysis adjustment for long run is caused by what?
answer
the exit & entry of firms
question
What is the identical costs assumption?
answer
the assumption that all firms in the industry have identical cost curves
question
What is the constant-cost industry asusmption?
answer
the assumption that the industry is a constant-cost industry meaning the entry & exit of firms does not affect resource prices or the locations of the average-total-cost-curves of individual firms
question
What is the basic conclusion we seek to explain about long-run adjustment?
answer
After all long-run adjustments are completed in a purely competitive industry, product price will be exactly equal to, and production will occur at, each firms minimum average total cost
question
The long-run adjustment conclusion follows from what two basic facts?
answer
firms seek profits and shun losses & under pure competition, firms are free to enter and leave an industry
question
As firms enter markets in the long-run...
answer
economic profits are eliminated
question
As firms exit markets in the long-run....
answer
economic losses are eliminated
question
What does it mean when an industry is a constant-cost industry?
answer
this means that industry expansion or contraction will not affect resource prices & production costs aka- the entry or exit of firms does not shift the long-run ATC curves of individual curves
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