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Perfect Competition - Coggle Diagram

- - - - LMC = P
  - - - A firm is earning a normal return on its investment, it is doing as well as it could by investing its money elsewhere
    - - Enters when it can earn a positive long run profit
      - Exits when it faces the prospect of a long-run loss
    - - All firms in the industry are maximizing profit
      - No firm has an incentive either to enter or exit the industry because all
        firms are earning zero economic profit
      - The price of the product is such that the quantity supplied by the industry is equal to the quantity demanded by consumers.
  - - - Long-run supply curve is horizontal.
      - P = LACmin
      - Input prices do not change when conditions change in the output market
    - - Long-run supply curve is upward sloping
      - The industry produces more output, but only at the higher price needed to compensate for the increase in input costs
    - - Long-run supply curve is downward sloping
      - The unexpected increase in demand causes industry output to expand.
        => take advantage of its size to obtain some of its inputs more cheaply