LONG RUN EQUILIBRIUM PRICE AND OUTPUT UNDER PERFECT COMPETITION
First condition for equilibrium of a firm is that marginal cost must be equal to marginal revenue and the condition is that marginal cost curve should cut the marginal revenue curve from below.
The condition is that average revenue or price should equal average cost. In the short run there is abnormal profits quit business.
This period of entry and by firms is by itself long run. The industry attains equilibrium when AR or Price = AC.
Price is also equal to marginal cost and revenue. Shows that point E is the long run equilibrium output.
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