8.4 Competition in the Long Run

Originally one thought that if there were a half dozen large computers in this country, hidden away in research laboratories, this would take care of all requirements we had throughout the country.

—Howard H. Aiken, Harvard, 1952.

In the long run, competitive firms can vary inputs that were fixed in the short run, so the long-run firm and market supply curves differ from the short-run curves. After briefly looking at how a firm determines its long-run supply curve that maximizes its profit, we examine the relationship between short-run and long-run market supply curves and competitive equilibria.

Long-Run Competitive Profit Maximization

A firm’s two profit-maximizing decisions—how much to produce and whether to ...

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