Firms will earn zero economic profit in the LR.
Consumers consider only price when choosing which firm to buy from.
Any firm that rises price above market will lose all sales.
Firms can freely enter and exit industries.`
Isoquant
inward shift; output held constant
Production Function
upward shift
Average cost curve
downward shift
Short-run market supply curve
the summation of the supply curve of the individual firms
Total Cost Curve
rightward shift
Isoquant
combines all factor combinations which give the same output (capital on y-axis, labor on x-axis, first half of U graph)
Shutdown Condition
If p>AVC, then a portion of fixed costs are covered.
If p<AVC, firm should shutdown.
