Managerial Economics and Strategy, 2/e

8.2 Competition in the Short Run

In this section, we examine the profit-maximizing behavior of competitive firms, derive their supply curves, and determine the competitive equilibrium in the short run. In the next section, we examine the same issues in the long run.

The short run is a period short enough that at least one input cannot be varied (Chapter 5). Because a firm cannot quickly build a new plant or make other large capital expenditures, a new firm cannot enter a market in the short run. Similarly, a firm cannot fully exit in the short run. It can choose not to produce—to shut down—but it is stuck with some fixed inputs such as a plant or other capital that it cannot quickly sell or assign to other uses. In the long run, all inputs can ...