Analyze the differences between short and long run production for a Perfectly Competitive Firm. In your analysis, explain the theoretical conditions that govern the market structure, market conduct and market performance of a perfectly competitive firm. In summary, what does an economist mean by saying that a market is “perfectly competitive”?

Show how a perfectly competitive firm could earn economic profit in the short run, but why a perfectly competitive firm can only expect to earn a normal profit in the long run.

What forces create the differences in industry performance over the long term?

Explain why the end-results of perfect competition in the long-run are desirable for the economy. In particular, what is the relationship between product price, marginal cost and average total cost in the long run for firms in a perfectly competitive industry, and why do economists see these as important outcomes?

Explain why any economic profit would only be temporary, if perfectly competitive firms in an in industry adopt a new and more-highly-productive technology. In this situation, you can assume free “public access” to an industry’s technical and financial information. Remember that the availability of perfect information is a typical assumption that impacts the conduct and performance of firms in a perfectly competitive industry.

Throughout your answer to this question, use graphs, completely labeled, to accompany your written analyses.