Question

State the conditions of long-run equilibrium of the industry under perfect competition.

Answer 1

1. An industry is in long-run equilibrium when its market demand equals its market supply.
2. The equilibrium point is determined by the intersection of the market demand curve and the market supply curve, where there is no tendency for the price to change.
3. The industry is neither expanding nor contracting, meaning there is no entry or exit of firms.
4. All firms in the industry earn only normal profits, eliminating any incentive for new firms to enter or existing firms to leave.
5. Each firm operates at the minimum point of its Long-Run Average Cost (LAC) curve.