For a perfectly competitive industry, an increase in market demand will result in Exit of some firms Economic profits in the long run Long-run Industry supply that is horizontal Price at minimum AVC in the long run Entry into and exit from a perfectly competitive industry will Drive price to minimum Long-Run AVC Produce economic losses for entering firms Allow efficient managers to earn economic profits Drive price to minimum Long-Run ATC Positive Economic Profits are A long-run operating condition necessary for a monopolist Profits above what it takes to keep the entrepreneur in that business Equal to producer surplus Equal to the markup of price over Average Total Cost Monopolistic competition is a market structure very much like perfect competition except that The demand curves facing firms are perfectly price inelastic Each firm has a strategy for how they will react to other firms’ price or quantity Entry and exit is not permitted Firms differentiate the characteristics of their product

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