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Market Supply Curve in the Short Run and Long Run definitions

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  • Short Run
    A period where the number of firms is fixed and supply is determined by existing firms' marginal cost curves.
  • Long Run
    A timeframe where firms can freely enter or exit, leading to zero economic profit and market adjustment.
  • Market Supply Curve
    A graphical representation showing total quantity supplied by all firms at various prices.
  • Marginal Cost Curve
    A firm's cost of producing one more unit, which also serves as its supply curve above average variable cost.
  • Average Variable Cost
    A firm's per-unit variable expense, acting as a threshold for production decisions in the short run.
  • Average Total Cost
    A firm's total cost per unit, including both fixed and variable components, crucial for profit analysis.
  • Economic Profit
    A firm's total revenue minus all explicit and implicit costs, including opportunity costs.
  • Accounting Profit
    A firm's revenue minus only explicit monetary costs, excluding opportunity costs.
  • Perfectly Elastic Supply
    A horizontal supply curve indicating that any quantity is supplied at a single price in the long run.
  • Equilibrium
    A market state where price equals average total cost, resulting in zero economic profit and stable firm numbers.
  • Entry
    The process of new firms joining a market when profits exist, increasing total supply and lowering price.
  • Exit
    The process of firms leaving a market when losses occur, reducing supply and raising price.
  • Opportunity Cost
    The value of the next best alternative forgone, included in economic profit calculations.
  • Profit Equation
    An expression, P minus ATC times Q, used to calculate total profit or loss for a firm.
  • Minimum Average Total Cost
    The lowest point on the average total cost curve, where long-run equilibrium price is set.