0
$\begingroup$

I have problems with deciding whether those statements are true or false.

  1. In a short/long run price of equilibrium on a perfectly compettive market might be either lower or higher then average total cost of one company operating on this market.
  2. In a short run total amount of companies in perfectly competitive branch of industry, changes when their economic gains are equal to zero.

Appreciate your help with some further comments about that.

PS. anticipating your questions i am preparing to an exam, that is why i am looking for an answer to those questions.

Improve this question
$\endgroup$
1
  • 2
    $\begingroup$ Typically, we want you to put some minimum effort into the questions, so it'd be at least nice to see what you think w.r.t. these questions (your assumed solutions) $\endgroup$
    – FooBar
    Apr 8, 2015 at 12:13

1 Answer 1

Reset to default
1
$\begingroup$

I'm not going to answer the questions for you, but here is some food for thought, you should be able to conclude yourself.

Ad 1

We know that in the long run equilibrium, there are zero profits: If they'd be positive, firms would enter, if they'd be negative, firms would leave. Can we conclude something about a firm's profits if it has average total costs smaller (larger) than the price?

Ad 2

What induces change in the total amount of companies in such a branch? Is having zero-profits one of these reasons?

Improve this answer
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge that you have read and understand our privacy policy and code of conduct.

Not the answer you're looking for? Browse other questions tagged or ask your own question.