In a perfectly competitive market within a constant-cost industry, the long-run supply curve is perfectly elastic. This means it's a straight horizontal line. This occurs because, in such markets, numerous firms are producing and selling identical products. As a result, no single firm can influence the market price by independently altering its output level.
When firms produce at their lowest average total cost (ATC), they reach a state of efficiency, producing goods at the cheapest rate possible. This scenario encourages firms to supply any quantity of the product at a fixed price, the price that just covers their production costs, without making extra profits.
The constant-cost industry part means that even as more firms enter or exit the market, the costs of resources per unit produced doesn't change. Because of this stability, the supply curve remains flat. Firms are willing to offer more goods at the same price because it still covers their costs, ensuring that consumers always have access to the products they need at consistent prices and the market operates smoothly without dramatic price changes.
From Chapter 8:
Now Playing
Perfect Competition
220 Views
Perfect Competition
158 Views
Perfect Competition
196 Views
Perfect Competition
118 Views
Perfect Competition
148 Views
Perfect Competition
113 Views
Perfect Competition
116 Views
Perfect Competition
97 Views
Perfect Competition
302 Views
Perfect Competition
106 Views
Perfect Competition
72 Views
Perfect Competition
188 Views
Copyright © 2025 MyJoVE Corporation. All rights reserved
We use cookies to enhance your experience on our website.
By continuing to use our website or clicking “Continue”, you are agreeing to accept our cookies.