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This chapter develops the long-run supply curve for a competitive industry. It begins with the simplest case, in which the industry consists of identical firms whose cost curves are not affected by the number of firms. Next it allows for these identical firms’ costs to be influenced by the number of firms. Then it analyzes the case in which each firm has unique cost curves. Finally, it addresses the implication of allocative efficiency.
KeywordsCost Curve Supply Curve Identical Firms Competitive Industry Price-taking Firms
- 1.McAfee RP (2006) Introduction to economic analysis. Available at www.introecon.com