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Determination of Short-run and Long-run equilibrium of the Firm under Perfect Competition (Eng Rec.)
Abstract
Perfect competition refers to that situation of the market in which there is numerous firm producing homogeneous products. A firm is in equilibrium when it is satisfied with its existing amount of output, minimizing losses and maximizing profits. The study of a firm's equilibrium will be undertaken under two time periods: Short Run Equilibrium and Long-Run Equilibrium. A firm in equilibrium may face any of the three situations: Super normal profits; Normal profits; or Minimum losses. Also, some situations there are when the price of products is so low that total revenue is not even enough to cover the variable cost of production. In such cases, firms' profit-maximizing decisions will be shut-down temporarily and produce nothing.
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Equilibrium of Firm under Perfect Competition
Perfect competition refers to that situation of the market in which numerous firms are producing homogeneous products. A group of such firms is called industry. This study is devoted to the study of the equilibrium of a firm under perfect competition. This study will be undertaken under two time periods:
(i) Short-Run Equilibrium, and (ii) Long-Run Equilibrium.
What is a Firm?
In the words of Watson, "A firm is a unit engaged in the production for sale at a profit and to maximize the profit."
Meaning of Firm's Equilibrium
Equilibrium is a point of rest for the firm implying the state of maximization of profits or minimization of losses. A firm is in equilibrium when it is satisfied with its existing amount of output. Á firm in equilibrium has no tendency either to increase or to decrease its output. The firm will be in this situation when either it will be earning maximum profit or incurring a minimum loss.
Definitions
In the words of Hansen, "A firm will be in equilibrium when it is of no advantage to increase or decrease its output."
According to Koutsoyiannis, "A firm is in equilibrium when it maximizes its profits."
Conditions of the Equilibrium of the Firm
The main conditions of the equilibrium of a firm are as under:
(1) Maximum Profits: The profit (π) of a firm is equal to the difference between its total revenue (TR) and total cost (TC). One of the...
Read More...
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By Sivananda PandaAbstract
Perfect competition refers to that situation of the market in which there is numerous firm producing homogeneous products. A firm is in equilibrium when it is satisfied with its existing amount of output, minimizing losses and maximizing profits. The study of a firm's equilibrium will be undertaken under two time periods: Short Run Equilibrium and Long-Run Equilibrium. A firm in equilibrium may face any of the three situations: Super normal profits; Normal profits; or Minimum losses. Also, some situations there are when the price of products is so low that total revenue is not even enough to cover the variable cost of production. In such cases, firms' profit-maximizing decisions will be shut-down temporarily and produce nothing.
Visit Website: Commerceya
Subscribe on Youtube: Commerceya
Equilibrium of Firm under Perfect Competition
Perfect competition refers to that situation of the market in which numerous firms are producing homogeneous products. A group of such firms is called industry. This study is devoted to the study of the equilibrium of a firm under perfect competition. This study will be undertaken under two time periods:
(i) Short-Run Equilibrium, and (ii) Long-Run Equilibrium.
What is a Firm?
In the words of Watson, "A firm is a unit engaged in the production for sale at a profit and to maximize the profit."
Meaning of Firm's Equilibrium
Equilibrium is a point of rest for the firm implying the state of maximization of profits or minimization of losses. A firm is in equilibrium when it is satisfied with its existing amount of output. Á firm in equilibrium has no tendency either to increase or to decrease its output. The firm will be in this situation when either it will be earning maximum profit or incurring a minimum loss.
Definitions
In the words of Hansen, "A firm will be in equilibrium when it is of no advantage to increase or decrease its output."
According to Koutsoyiannis, "A firm is in equilibrium when it maximizes its profits."
Conditions of the Equilibrium of the Firm
The main conditions of the equilibrium of a firm are as under:
(1) Maximum Profits: The profit (π) of a firm is equal to the difference between its total revenue (TR) and total cost (TC). One of the...
Read More...