Pure Competition in the Long Run

Flashcards covering key terms and concepts from Chapter 11 on Pure Competition in the Long Run.

Long Run

The period in which firms can expand or contract capacity and can enter or exit the industry.

Profit Maximization

The process by which firms seek to achieve the highest possible profit in the long run.

Identical Costs

The assumption that all firms in the industry have the same costs in the analysis of long-run competition.

Constant-cost Industry

An industry where the entry and exit of firms do not affect resource prices.

Long-Run Equilibrium

A state where entry eliminates profits and exit eliminates losses, stabilizing price.

Productive Efficiency

Achieving the lowest possible cost by producing at the minimum average total cost.

Allocative Efficiency

Producing at a level where price equals marginal cost (P = MC).

Triple Equality

The condition in which price equals marginal cost, and marginal cost equals minimum average total cost.

Dynamic Adjustments

The automatic changes in purely competitive markets due to shifts in consumer preferences, resource availability, and technology.

Creative Destruction

The process by which innovation leads to the creation of new products and methods, which may displace older products and methods.