Looks like no one added any tags here yet for you.
Invisible hand property 1
the P = MC condition balances production across firms in a way that minimizes total industry costs of production
Invisible Hand property 2
Entry and exit signals balance production across different industries in a way that maximizes the total value of production
Minimization of total industry costs of production
to maximize profits, each firm adjusts its output until P = MC
Thus, in a competitive market with N number of firms, P = MC1 = MC2 = … = MCN
results in minimizing total costs for the industry
Overview of Balance of industries
competitive markets ensure that the right amount of a good is produced
entrepreneurs seek profit and avoid losses
profit is a signal that labor and capital are being used productively in satisfying wants
profit seeking aligns with the social incentive to move labor and capital out of low value industries and into high value industries
Resources flow from low profit to high profit industries
if P > AC, profits are above normal, causing capital and labor to enter the industry
If P < AC, profits are below normal, causing capital and labor to exit the industry
the profit rate of all competitive industries tends toward the same level
Under Balance of industries
the total value of all production is maximized (allocative efficiency)
Elimination Principle
above normal profits are eliminated by entry and below normal profits are eliminated by exit
Implication of the elimination principle
above normal profits are temporary
to earn above normal profits, entrepreneurs must innovate
competition is about innovating
above normal profits are constantly being eliminated by competition
new sources of profit are constantly being created through innovation