微观经济学英文版教学资料.ppt

Chapter 8: Analysis of Perfectly Competitive Markets As we say, when firms can not cover the variable cost, they will shutdown. However, in the long run every cost is variable. So, in the long run firms will produce only when price is at or above the zero-profit condition where price equals average cost. in other words, long run price must cover out-of pocket cost such as labor, materials, equipment, taxes and other expense along with opportunity cost such as competitive return on the owner’s invested capital. That means long-run price must be equal to or above total long-run average cost.