Microeconomics › Section H · Perfect competition › Topic H.3
Entry and exit in the long run
Short-run profits are an invitation, not a destination. In the long run, nothing stops new firms from joining a profitable industry or unprofitable ones from leaving - and that traffic of firms is the mechanism that drags prices down to cost and economic profit to exactly zero.
In this topic
- The long run opens the doors
- Why profits are temporary
- Worked example: blueberry farms enter
- Long-run equilibrium: price equals minimum ATC
- Zero profit, comfortably
- Exit: the mirror mechanism
- Worked example: a demand slump unwinds
- Long-run industry supply
- Why some industries stay expensive
- Common mistakes to avoid
- Key takeaways
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