Principles of Microeconomics / Unit 9 MIC 0808 short lesson, about 20 seconds
Long-Run Equilibrium: The Tangency
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The idea
Entry stops when the firm's demand curve has shifted to touch its average cost curve at one point. There price equals average cost: zero economic profit, and no reason to enter or leave.
In practice
Losses run it backward: exit shifts survivors' demand right to the same tangency.
Where people slip
Zero economic profit, not zero accounting profit; the owners earn what they would elsewhere.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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