Long-Run Equilibrium Positions of Firm and Industry
• As all factors are variable in the long-run, firms can adjust its supply which affects the equilibrium price and quantity.
• New firms will be attracted to the industry if existing firms are making supernormal profit while existing firms that cannot cope with subnormal profit will exit from the industry.
• Eventually, in the long run, only efficient firms exist and will be earning normal profit as illustrated below.
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