Equilibrium Essay Example | Topics and Well Written Essays - 250 words

Equilibrium - Essay Exampler accost all its costs it may only need to cover the total variable costs incurred thencely the rising cost of milking equipment will not have any effect on the firms in the intentness in the short run. Consequently, with marginal revenue being equal to marginal cost, super-normal profits will be realized.In the long run, due to freedom of entry and exit from the pains, the surplus profits inform of the paranormal profits realized by the firms in the industry will attract new firms into the industry thus increasing the supply of the product (Chiappori and Ekeland 2006). Increase in supply results to fall prices as explained by the integrity of supply. The fall in prices results to the individual firms facing a falling perfectly elastic demand bend dexter consequently resulting to a reduction of the surplus profits. This will continue to the point where the firms will no womb-to-tomb be making surplus profits, realized when the firm is just covering its production costs as a result of the increase in the cost of milking equipments. During this time, no more firms will be attracted to the industry when the price is equal to the come cost while the demand curve is a tangent to the average cost curve at the minimum point, a point when the firm is making normal