Explain why it is said that under perfect competition in the long run while industry output is well defined, a firm output is indeterminate if there are constant return to scale in production?

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Explain why it is said that under perfect competition in the long run while industry output is well defined, a firm output is indeterminate if there are constant return to scale in production?

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Explain why it is said that under perfect competition in the long run ...

Under perfect competition in the long run, industry output is well defined because it is determined by the total demand for the product in the market, the number of firms producing the product, and the available technology for production. However, a firm's output is indeterminate in this scenario because firms can freely enter or exit the market based on their profitability.

In the long run, firms under perfect competition operate under constant returns to scale, meaning that the average cost of production remains constant as the firm increases or decreases its scale of production. This is because all firms have access to the same technology and resources, and can therefore produce at the same cost.

Given this scenario, firms can freely adjust their output to maximize profits. If a firm is operating at a profit, it can increase its output to take advantage of the profits. If a firm is operating at a loss, it can decrease its output or exit the market altogether.

Therefore, in the long run under perfect competition, while industry output is well defined, a firm's output is indeterminate because firms can adjust their output based on their profitability.

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Explain why it is said that under perfect competition in the long run while industry output is well defined, a firm output is indeterminate if there are constant return to scale in production?

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