Changes

''Example'':  The price charged by a perfectly competitive firm in the long run or the short run equals marginal cost, because that is always true when there is perfect competition.  But the relation between that price and the firm's overall costs depends on whether it is in the long run or the short run.  In the long run, the firm's costs are minimized, and thus the price will be equal to the firm's average total cost for a perfectly competitive firm.  This is because the perfect competition drives the price down to its lowest possible level: average total cost.  (On an exam question, assume that costs are "economic costs" that include everything from the owner's salary to the investors' profits to the opportunity costs.)

''Example'':  The price charged by a perfectly competitive firm in the long run or the short run equals marginal cost, because that is always true when there is perfect competition.  But the relation between that price and the firm's overall costs depends on whether it is in the long run or the short run.  In the long run, the firm's costs are minimized, and thus the price will be equal to the firm's average total cost for a perfectly competitive firm.  This is because the perfect competition drives the price down to its lowest possible level: average total cost.  (On an exam question, assume that costs are "economic costs" that include everything from the owner's salary to the investors' profits to the opportunity costs.)

A question probing the difference between the short and long run might ask what the basic difference is.  We earned that in the long run all costs are variable.  What about the short run?  '''In the short run, some costs of a firm are fixed and unchangeable'''.  For example, the night before the March for Life bus trip to D.C., decisions about the buses must be made in the short run.  It is too late then to change the number of buses.  The cost of the buses is fixed, not variable, in the short run.

A question probing the difference between the short and long run might ask what the basic difference is.  We learned that in the long run all costs are variable.  What about the short run?  '''In the short run, some costs of a firm are fixed and unchangeable'''.  For example, the night before the March for Life bus trip to D.C., decisions about the buses must be made in the short run.  It is too late then to change the number of buses.  The cost of the buses is fixed, not variable, in the short run.

== Review: Monopolistic Competition ==

== Review: Monopolistic Competition ==