In long-run competitive equilibrium, the market equilibrium price equals b) the minimum point of the average total cost curve.
An increase in demand generates economic profit in the short run and encourages entry in the long run in a perfectly competitive market in long-run equilibrium; a decrease in demand generates economic losses (negative economic profits) in the short run and forces some businesses to leave the industry in the long run.
In the short term, price changes due to changes in production costs will be smaller than those changes. In the long run, prices will adapt to fully reflect changes in production costs.
In the short run, a change in fixed costs will have no impact on the price or output. Over time, it will encourage entry or exit, causing the price to fluctuate enough to result in enterprises earning nothing.
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