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Market Supply Curve in the Short Run and Long Run definitions

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  • Market Supply Curve
    Represents total quantity supplied by all firms at each price, constructed by summing individual marginal cost curves.
  • Short Run
    Period where the number of firms is fixed, and market supply is determined by existing firms' marginal cost curves.
  • Long Run
    Period allowing entry and exit of firms, leading to zero economic profit and a perfectly elastic supply curve.
  • Marginal Cost Curve
    Graph showing the cost of producing one more unit, serving as the supply curve for individual firms above average variable cost.
  • Average Total Cost
    Total cost per unit, including all fixed and variable costs, crucial for determining profit and market equilibrium.
  • Economic Profit
    Profit calculation that includes opportunity costs, reaching zero in the long run due to market entry and exit.
  • Accounting Profit
    Profit based solely on monetary costs and revenues, remaining positive even when economic profit is zero.
  • Opportunity Cost
    Value of the next best alternative forgone, included in economic profit calculations for firms.
  • Equilibrium
    State where market price equals average total cost, resulting in zero economic profit and stable firm numbers.
  • Perfectly Elastic Supply
    Supply curve that is flat, indicating any quantity demanded can be supplied at a constant price in the long run.
  • Entry
    Process where new firms join the market when profits exist, increasing supply and lowering price.
  • Exit
    Process where firms leave the market when losses occur, reducing supply and raising price.
  • Minimum ATC
    Lowest point on the average total cost curve, where firms produce efficiently and market price stabilizes.
  • Supply Shift
    Movement of the supply curve due to changes in the number of firms, affecting market price and equilibrium.
  • Fixed Firms
    Condition in the short run where the number of firms does not change, limiting supply adjustments.