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Que : 58. What is the supply curve of a firm in the long run ? |
Answer:  In the long run, a firm under perfect competition earns normal profits due to freedom of entry and exit. AR=MR and both coincide in a horizontal straight line parallel to X-axis. In the above figure LAC and LMC are respectively, long run average cost and long run marginal cost curves. the condition for equilibrium MR = LMC, LMC curve cuts the MR curve from below are satisfied at point R. point R is the equilibrium position of the firm at which the equilibrium output is OM at the price of OP. corresponding to this, LAC=AR so, the firm will be earning only normal profits. |
