📖 完全竞争：短期 vs 长期均衡

Economics

I. Lesson Focus

This lesson examines how firms in perfectly competitive markets make production decisions in the short run versus the long run. Candidates must master the conditions for short-run profit maximization, shutdown decisions, the mechanism that drives economic profit to zero in the long run, and the differences between short-run and long-run industry supply curves.

II. The Problem

A small corn farmer operates in a perfectly competitive market. When corn prices suddenly surged in 2023, the farmer earned large profits. By 2025, however, many new farmers had entered the market, driving prices back down and eliminating the original farmer’s economic profit. The farmer wonders why large short-run profits disappear in the long run and whether the firm should shut down when losing money. CFA exams frequently test the derivation of the short-run supply curve, the meaning of zero economic profit in long-run equilibrium, shutdown versus exit decisions, and the shape of long-run supply. This lesson solves these core questions with precise definitions, formulas, and numerical applications.

III. Core Characteristics of Perfect Competition

A market is perfectly competitive only if four conditions hold simultaneously: - Many buyers and sellers, none of whom can influence market price (all are price takers); - Homogeneous products; - Perfect information; - Free entry and exit of resources.

Because each firm is a price taker, the demand curve facing an individual firm is perfectly elastic:
$P = MR = AR = D$.

IV. Short-Run Equilibrium: Profit Maximization and Supply Decisions

In the short run, at least one input is fixed, so fixed costs (FC) exist. The firm maximizes profit where marginal revenue equals marginal cost:
$MR = MC$.
Since $P = MR$, the short-run equilibrium condition simplifies to:
$P = MC$.

Short-run supply curve: The portion of the firm’s MC curve that lies above the minimum average variable cost (AVC). When price falls below minimum AVC, the firm shuts down immediately; its loss equals only fixed costs.

Four possible short-run outcomes: 1. Positive economic profit: $P > ATC$ 2. Zero economic profit: $P = ATC$ 3. Economic loss but continue operating: $\min AVC < P < ATC$ 4. Shutdown: $P < \min AVC$

Accounting profit versus economic profit:
Economic profit = Total revenue – Total opportunity cost (explicit + implicit costs).
Accounting profit subtracts only explicit costs. Therefore, when economic profit is zero, accounting profit equals normal profit (positive).

V. Long-Run Equilibrium: The Zero-Economic-Profit Mechanism

In the long run, all inputs are variable and firms may freely enter or exit. - Positive short-run economic profit attracts new entrants, increasing market supply and driving price down until $P = \min ATC$ and economic profit reaches zero. - Economic losses cause firms to exit, reducing supply and raising price until $P = \min ATC$.

Three simultaneous conditions for long-run equilibrium: 1. $P = MC$ (profit maximization); 2. $P = ATC$ (zero economic profit); 3. Production occurs at the minimum point of ATC and LRAC (productive efficiency).

Consequently, every firm earns only a normal profit (zero economic profit) and operates at the lowest point on its long-run average cost curve (LRAC). In a constant-cost industry, the long-run industry supply curve is perfectly elastic (horizontal) at the level of minimum LRAC.

Returns to scale and long-run costs: The LRAC curve is U-shaped. In perfect competition, free entry and exit ensure that all firms eventually produce at the bottom of LRAC.

VI. Short-Run versus Long-Run Supply Curves

• Short-run market supply: Horizontal summation of individual firms’ MC curves above minimum AVC; positively sloped.
• Long-run market supply: Horizontal in a constant-cost industry; upward-sloping in an increasing-cost industry; downward-sloping in a decreasing-cost industry (rarely tested).

Worked Cases

Case 1: Short-Run Profit Maximization and Shutdown Decision

A perfectly competitive firm has the following cost functions (in currency units): - $FC = 200$ - $AVC = 0.5Q + 2$ - $MC = Q + 2$ - Market price $P = 8$

Calculations: 1. Profit-maximizing output: $P = MC \Rightarrow 8 = Q + 2 \Rightarrow Q = 6$. 2. $ATC = \frac{200}{6} + (0.5\times6 + 2) \approx 33.33 + 5 = 38.33$. 3. $TR = 8\times6 = 48$, $TC = 200 + (0.5\times36 + 2\times6) = 230$. 4. Economic profit = $48 - 230 = -182$ (loss). 5. $AVC(6) = 5$. Because $P = 8 > 5$, the firm should continue producing; the loss ($182) is smaller than fixed costs ($200).

Conclusion: Continue operations in the short run despite an economic loss.

Case 2: Determining Long-Run Equilibrium Price

Suppose the minimum long-run average cost for the industry is $\min LRAC = 15$. Short-run demand surges, pushing price to $P = 22$. - Short run: Each firm produces where $MC = 22$ and earns positive economic profit. - Long run: New firms enter, supply shifts right, and price falls until $P = 15$. At that point $P = MC = ATC = \min LRAC = 15$ for every firm and economic profit equals zero. - The long-run industry supply curve is horizontal at $15$.

Case 3: Break-Even and Shutdown Prices

Given: - Shutdown price ($\min AVC$) = $6$ - Break-even price ($\min ATC$) = $10$ - Current market price $P = 8$

Analysis: - $P = 8 > 6$, so the firm does not shut down. - $P = 8 < 10$, so the firm incurs an economic loss. - Short-run output is the quantity where $MC = 8$. - If price falls to $5$, the firm shuts down immediately and limits its loss to fixed costs.

Traps

Key Formulas

• Profit-maximizing condition: $P = MR = MC$
• Economic profit = $(P - ATC) \times Q$
• Shutdown rule: Shut down if $P < \min AVC$
• Break-even price: $P = \min ATC$
• Long-run equilibrium: $P = MC = ATC = \min LRAC$
• Short-run firm supply curve = MC curve for all $P \geq \min AVC$
• Long-run industry supply (constant-cost industry) = Horizontal line at $\min LRAC$

Practice Questions

Q1. In a perfectly competitive market, the necessary short-run equilibrium condition for a firm is:
A. $P = ATC$
B. $P = MC$
C. $P = AVC$
D. $P = AFC$

Q2. A perfectly competitive firm faces $P=12$, $\min AVC=10$, and $\min ATC=15$. The firm should:
A. Shut down immediately
B. Continue producing despite an economic loss
C. Continue producing and earn economic profit
D. Exit the market

Q3. Which statement is correct for long-run equilibrium in perfect competition?
A. Firms still earn positive economic profit
B. $P = MC = ATC = \min LRAC$
C. Firms produce on the declining portion of ATC
D. The market supply curve slopes downward

Q4. In a constant-cost industry, the shape of the long-run market supply curve is:
A. Upward-sloping
B. Downward-sloping
C. Horizontal
D. U-shaped

Q5. Zero economic profit implies that:
A. Accounting profit is zero
B. The firm earns a normal profit
C. The firm should exit the market
D. Fixed costs are not covered

Q6. A firm’s short-run supply curve consists of:
A. The entire MC curve
B. The portion of the MC curve above minimum AVC
C. The ATC curve
D. The AVC curve

Q7. When market price falls below minimum average variable cost, the firm will:
A. Continue producing to reduce losses
B. Shut down and lose only its fixed costs
C. Exit the market immediately
D. Expand production scale

Q8. Which situation causes price in a perfectly competitive market to fall in the long run?
A. Initial economic losses
B. Initial positive economic profit
C. A decrease in demand
D. Technological regression

Answers

Takeaways

• Perfectly competitive firms are price takers; their demand curve is horizontal at the market price.
• Short-run rule: Produce where $P = MC$ provided $P \geq \min AVC$; otherwise shut down.
• Long-run free entry and exit drive economic profit to zero so that $P = \min LRAC$.
• Zero economic profit does not mean zero accounting profit; normal profit is earned.
• Short-run industry supply slopes upward; long-run supply is horizontal in constant-cost industries.
• Distinguish clearly between accounting profit, economic profit, shutdown price, and break-even price—these distinctions appear frequently on the exam.