Micro 3.7B Perfect Competition in the Long Run

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This video covers topic 3.7 of the AP Microeconomics Course Exam Descriptions (CED). This video covers qualities of perfectly competitive firms, long run adjustment, low barriers to entry, firms entering and exiting the market, as well as increasing, decreasing, and constant cost industries.
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Пікірлер: 3

@sweet.commentary 6 ай бұрын

Hello! I have a few questions. I was wondering if there was a per unit subsidy or tax, what is the effect of the price and quantity for both the market and firm in the short run & the long run? Why? What is the effect of a lump sum on the price and quantity for both the market and firm in the short run & the long run? Why?

@ReviewEcon 6 ай бұрын

Remember firms under perfect competition do not impact the market in the short run. They are too small. That means the tax or subsidy only impacts the firm in the short run. Per-unit taxes or subsidies shift both the ATC and the MC, while lump sum taxes are subsidies shift the ATC. They shift up with a tax and down with the subsidy. Per unit taxes and subsidies change the firms quantity because they move the marginal cost. Lump sum taxes and subsidies do not change the firm quantity because only the ATC moves. The price does not change in a short run because the price is determined by the market and the firm is a price taker. The impact on the market is a long run impact that results from changes in a firm's, economic profit or loss. When there are economic profits firms enter the market shifting the supply to the right and when there are economic losses firms exit the market shifting the supply to the left. The shifts of the supply curve change the price for the firm and the price in the market. The price changing also changes the quantity for the market and the firm. I hope that helps!

@sweet.commentary 6 ай бұрын

@@ReviewEcon Thank you so much for the explanations!