   Chapter 22, Problem 13QP

Chapter
Section
Textbook Problem

In long-run competitive equilibrium, P = MC = SRATC = LRATC. Because P = MR, we can write the preceding condition as P = MR = MC = SRATC = LRATC. The condition thus consists of four parts: (a) P = MR, (b) MR = MC, (c) P = SRATC, and (d) SRATC = LRATC. Part (b)—MR = MC—is true because the perfectly competitive firm attempts to maximize profits, and that equation represents how it does so. What are the explanations for parts (a), (c), and (d)?

(a)

To determine

Explain P=MR.

Explanation

The first condition, price is equal to marginal revenue (P=MR) explains, under perfect competitive f

(c)

To determine

Explain P=SRATC.

(d)

To determine

Explain SRATC>LRATC.

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