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1. Digital Study Guide, written by William Walstad
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After reading this chapter, you should be able to:
Explain how the long run differs from the short run in pure competition.
Describe why profits encourage entry into a purely competitive industry and losses result in firms exiting the industry.
Explain how the entry and exit of firms affects resource flows and long-run profits and losses.
Explain the differences between constant-cost, increasing-cost, and decreasing-cost industries.
Show how long-run equilibrium in pure competition produces an efficient allocation of resources.
Discuss creative destruction and the profit incentives for innovation.
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