Chapter Preview: In Chapter 5, we examined short-run production conditions, and then, turned our attention to the decisions faced by a perfectly competitive entrepreneur operating in the short run. We adopt the same approach in this chapter, but for the long run. Also, we establish “performance criteria” for an industry in long-run equilibrium and revisit the concept of efficiency that we first met in Chapter 1, but explored more comprehensively in Chapter 3.
By the end of this chapter, you will be able to:
• Explain why the long-run average cost curve is U-shaped and give examples of factors that would cause economies or diseconomies of scale.
• Outline the process by which long-run competitive ...