290 CHAPTER 12 Perfect Competition

◆ Competition and Efficiency only ones who benefit from it, then the market
demand curve measures the benefit to the entire soci-
A competitive market can achieve an efficient use of ety and is the marginal social benefit curve.
resources. You first studied efficiency in Chapter 2. Competitive firms produce the quantity that maxi-
Then in Chapter 5, using only the concepts of mizes profit. We derive the firm’s supply curve by find-
demand, supply, consumer surplus, and producer ing the profit-maximizing quantity at each price. So
surplus, you saw how a competitive market achieves firms get the most value out of their resources at all
efficiency. Now that you have learned what lies points along their supply curves. If the firms that pro-
behind the demand and supply curves of a competi- duce a good or service bear all the costs of producing
tive market, you can gain a deeper understanding of it, then the market supply curve measures the marginal
the efficiency of a competitive market. cost to the entire society and the market supply curve
is the marginal social cost curve.

Efficient Use of Resources Equilibrium and Efficiency Resources are used effi-
Recall that resource use is efficient when we produce ciently when marginal social benefit equals marginal
the goods and services that people value most highly social cost. Competitive equilibrium achieves this
(see Chapter 2, pp. 33–35, and Chapter 5, p. 108). If efficient outcome because, with no externalities, price
someone can become better off without anyone else equals marginal social benefit for consumers, and
becoming worse off, resources are not being used effi- price equals marginal social cost for producers.
ciently. For example, suppose we produce a computer The gains from trade are the sum of consumer sur-
that no one wants and no one will ever use and, at plus and producer surplus. The gains from trade for
the same time, some people are clamoring for more consumers are measured by consumer surplus, which is
video games. If we produce fewer computers and the area below the demand curve and above the price
reallocate the unused resources to produce more paid. (See Chapter 5, p. 109.) The gains from trade
video games, some people will become better off and for producers are measured by producer surplus, which
no one will be worse off. So the initial resource allo- is the area above the supply curve and below the price
cation was inefficient. received. (See Chapter 5, p. 111.) The total gains
In the more technical language that you have from trade equals total surplus —the sum of con-
learned, resource use is efficient when marginal social sumer surplus and producer surplus. When the mar-
benefit equals marginal social cost. In the computer ket for a good or service is in equilibrium, the gains
and video games example, the marginal social benefit from trade are maximized.
of a video game exceeds its marginal social cost; the
marginal social cost of a computer exceeds its mar- Illustrating an Efficient Allocation Figure 12.12 illus-
ginal social benefit. So by producing fewer computers trates the efficiency of perfect competition in long-
and more video games, we move resources toward a run equilibrium. Part (a) shows the individual firm,
higher-valued use. and part (b) shows the market. The equilibrium mar-
ket price is P*. At that price, each firm makes zero
economic profit and each firm has the plant that
Choices, Equilibrium, and Efficiency enables it to produce at the lowest possible average
We can use what you have learned about the decisions total cost. Consumers are as well off as possible
made by consumers and competitive firms and market because the good cannot be produced at a lower cost
equilibrium to describe an efficient use of resources. and the price equals that least possible cost.
In part (b), consumers get the most out of their
Choices Consumers allocate their budgets to get the resources at all points on the market demand curve,
most value possible out of them. We derive a con- D = MSB. Consumer surplus is the green area.
sumer’s demand curve by finding how the best Producers get the most out of their resources at all
budget allocation changes as the price of a good points on the market supply curve, S = MSC.
changes. So consumers get the most value out of their Producer surplus is the blue area. Resources are used
resources at all points along their demand curves. If efficiently at the quantity Q* and price P*. At this
the people who consume a good or service are the point, marginal social benefit equals marginal social
 Competition and Efficiency 291

FIGURE 12.12 Efficiency of Perfect Competition

Price
Price and cost

S = MSC

MC
LRAC

SRAC
Consumer
surplus
Efficient
P* MR P* allocation

Producer
Long-run surplus
competitive
equilibrium

D = MSB

0 q* 0 Q*
Quantity Quantity

(a) A single firm (b) A market

Demand, D, and supply, S, determine the equilibrium price, on the market demand curve, and firms are producing at
P*. A firm in perfect competition in part (a) produces q* at least cost and are on the market supply curve. With no
the lowest possible long-run average total cost. In part (b), externalities, marginal social benefit equals marginal social
consumers have made the best available choices and are cost, so resources are used efficiently at the quantity Q*.

animation

cost, and total surplus (the sum of producer surplus

and consumer surplus) is maximized. REVIEW QUIZ
When firms in perfect competition are away from 1 State the conditions that must be met for
long-run equilibrium, either entry or exit is taking resources to be allocated efficiently.
place and the market is moving toward the situation
depicted in Fig. 12.12. But the market is still 2 Describe the choices that consumers make and
efficient. As long as marginal social benefit (on the explain why consumers are efficient on the
market demand curve) equals marginal social cost market demand curve.
(on the market supply curve), the market is efficient. 3 Describe the choices that producers make and
But it is only in long-run equilibrium that consumers explain why producers are efficient on the
pay the lowest possible price. market supply curve.
4 Explain why resources are used efficiently in a
◆ You’ve now completed your study of perfect com- competitive market.
petition. Reading Between the Lines on pp. 292–293 You can work these questions in Study
gives you an opportunity to use what you have learned Plan 12.6 and get instant feedback.
to understand events in the global market for corn
during the past few years.
Although many markets approximate the model of Chapter 14 we study monopolistic competition and
perfect competition, many do not. In Chapter 13, we in Chapter 15 we study oligopoly. When you have
study markets at the opposite extreme of market completed this study, you’ll have a tool kit that will
power: monopoly. Then we’ll study markets that lie enable you to understand the variety of real-world
between perfect competition and monopoly. In markets.
 READING BETWEEN THE LINES

Perfect Competition
in Corn
Bumper Harvests Bring Stability
http://www.ft.com
June 1, 2010

There is no better fertilizer than high prices, the old farming adage goes. Trends in agricul-
ture appear to be proving this resoundingly true.
The spike in prices that caused the first global food crisis in 30 years in 2007–08 has led to
large increases in production of foods such as corn and wheat. Farmers have responded to
higher prices. ...
The U.S. Department of Agriculture said ...“Higher prices, and thus expanded acreage, in
combination with favorable weather, have helped production expand sharply.”
Global corn production will hit 835m metric tons in the 2010–11 season, its highest ever
level, the USDA forecasts. ... That is likely to lead to a period of relatively stable prices. ...
While prices for the main food and feed grain crops—corn, wheat, and soybeans—are likely
to remain steady and low in the next year or so, that does not mean a repeat of the food crisis
is impossible. ...
One argument against that view holds that
technological gains in response to the crisis ESSENCE OF THE STORY
have boosted productivity, making farmers
more able to deal with increasing consumption. ■ In 2010–11, global corn production will reach
its highest ever level at 835 million metric tons.
Some crops, such as corn, saw record yields in
the 2009–10 season and the USDA is predict- ■ High prices in 2007–08 led to large increases
in the acreage of corn and wheat.
ing high yields for next year as well.
■ Favorable weather also helped to increase
But analysts ascribe the gains in productivity production of these crops.
more to fortunate weather conditions than a ■ Prices for corn, wheat, and soybeans will likely
revolution in farming technology. ... remain low next year, but a future price rise
might occur.
Copyright 2010 The Financial Times. Reprinted with permission. Further
reproduction prohibited. ■ A revolution in farming technology would
increase production without raising costs and
prices.
■ The current gain in productivity is most likely
the result of fortunate weather and likely to be
temporary.

292
 ECONOMIC ANALYSIS

■ The global market for corn is competitive and the ■ In 2009 and 2010, good weather conditions in-
model of perfect competition shows how that market creased the supply of corn. By 2010–11, the supply
works. curve had shifted rightward to S1. The price fell to
$230 per metric ton and production increased to 835
■ During 2006 through 2008, increases in demand
million metric tons.
brought a rising price and an increase in the quantity
of corn supplied. ■ Back on the farm in Fig. 2, the lower price decreased
marginal revenue and the MR curve shifted downward
■ In 2009 and 2010, good weather conditions brought
to MR1.
an increase in the supply of corn and the quantity of
corn increased further but its price fell. ■ But the fortunate weather increased farm productivity
and lowered the cost of producing corn. The average
■ Figure 1 illustrates these events in the market for corn total cost curve shifted downward to ATC1 and the
and Fig. 2 their effects on an individual farm. marginal cost curve shifted downward to MC1.
■ From 2006 through 2008, the supply curve of corn ■ The combination of the lower price and lower costs
was S0 in Fig. 1. The demand for corn increased and might leave the farm with an economic profit. In Fig. 2
by 2008, the demand curve was D. The price of corn we’re assuming that the farm again made zero eco-
in 2008 was $310 per metric ton and 800 million met- nomic profit.
ric tons were produced.
■ If farms did make a positive (or negative) economic
■ In 2008, the farm faced a marginal revenue curve MR0 profit, entry (or exit) would eventually return them to a
and had average total cost curve ATC0 and marginal zero economic profit position like that shown in Fig. 2.
cost curve MC0 in Fig. 2.
■ The farm maximized profit by producing 8,000 metric
tons and (we will assume) made zero economic profit.
Price (2010 dollars per metric ton)

Price and cost (2010 dollars per metric ton)

500 S0 500 MC0

S1 MC1

400 400
ATC0

310 310 MR0

ATC1

230 230 MR1

200 200

0 750 800 835 900 950 0 7,500 8,000 8,350 9,000 9,500
Quantity (millions of metric tons) Quantity (metric tons)

Figure 1 The market for corn Figure 2 A corn farmer

293
294 CHAPTER 12 Perfect Competition

SUMMARY

Key Points Output, Price, and Profit in the Long Run

(pp. 283–285)
What Is Perfect Competition? (pp. 274–275)
■ Economic profit induces entry and economic loss
■ In perfect competition, many firms sell identical induces exit.
products to many buyers; there are no restrictions ■ Entry increases supply and lowers price and profit.
on entry; sellers and buyers are well informed
Exit decreases supply and raises price and profit.
about prices.
■ In long-run equilibrium, economic profit is zero.
■ A perfectly competitive firm is a price taker.
There is no entry or exit.
■ A perfectly competitive firm’s marginal revenue
always equals the market price. Working Problems 10 and 11 will give you a better under-
standing of output, price, and profit in the long run.
Working Problems 1 to 3 will give you a better under-
standing of perfect competition. Changing Tastes and Advancing Technology
(pp. 286–289)
The Firm’s Output Decision (pp. 276–279)
■ The firm produces the output at which marginal
■ A permanent decrease in demand leads to a
revenue (price) equals marginal cost. smaller market output and a smaller number of
firms. A permanent increase in demand leads to a
■ In short-run equilibrium, a firm can make an eco- larger market output and a larger number of firms.
nomic profit, incur an economic loss, or break even.
■ The long-run effect of a change in demand on price
■ If price is less than minimum average variable cost, depends on whether there are external economies
the firm temporarily shuts down. (the price falls) or external diseconomies (the price
■ At prices below minimum average variable cost, a rises) or neither (the price remains constant).
firm’s supply curve runs along the y-axis; at prices ■ New technologies increase supply and in the long
above minimum average variable cost, a firm’s sup- run lower the price and increase the quantity.
ply curve is its marginal cost curve.
Working Problems 12 to 16 will give you a better under-
Working Problems 4 to 7 will give you a better under- standing of changing tastes and advancing technologies.
standing of a firm’s output decision.
Competition and Efficiency (pp. 290–291)
Output, Price, and Profit in the Short Run
■ Resources are used efficiently when we produce
(pp. 280–283)
goods and services in the quantities that people
■ The market supply curve shows the sum of the value most highly.
quantities supplied by each firm at each price. ■ Perfect competition achieves an efficient alloca-
■ Market demand and market supply determine tion. In long-run equilibrium, consumers pay the
price. lowest possible price and marginal social benefit
■ A firm might make a positive economic profit, a equals marginal social cost.
zero economic profit, or incur an economic loss.
Working Problems 17 and 18 will give you a better under-
Working Problems 8 and 9 will give you a better under- standing of competition and efficiency.
standing of output, price, and profit in the short run.

Key Terms
External diseconomies, 287 Marginal revenue, 274 Short-run market supply curve, 280
External economies, 287 Perfect competition, 274 Shutdown point, 278
Long-run market supply curve, 287 Price taker, 274 Total revenue, 274
 Study Plan Problems and Applications 295

STUDY PLAN PROBLEMS AND APPLICATIONS

You can work Problems 1 to 18 in MyEconLab Chapter 12 Study Plan and get instant feedback.

What Is Perfect Competition? (Study Plan 12.1) Price Quantity demanded

(dollars per box) (thousands of boxes per week)
Use the following information to work Problems 1
to 3. 3.65 500
Lin’s makes fortune cookies that are identical to 5.20 450
those made by dozens of other firms, and there is 6.80 400
free entry in the fortune cookie market. Buyers and 8.40 350
sellers are well informed about prices. 10.00 300
1. In what type of market does Lin’s operate? What 11.60 250
determines the price of fortune cookies and what 13.20 200
determines Lin’s marginal revenue from fortune Each producer of paper has the following costs
cookies? when it uses its least-cost plant:
2. a. If fortune cookies sell for $10 a box and Lin’s Average Average
Output Marginal cost
offers its cookies for sale at $10.50 a box, how variable cost total cost
(boxes (dollars per
many boxes does it sell? per week) additional box) (dollars per box)
b. If fortune cookies sell for $10 a box and Lin’s
offers its cookies for sale at $9.50 a box, how 200 6.40 7.80 12.80
many boxes does it sell? 250 7.00 7.00 11.00
3. What is the elasticity of demand for Lin’s fortune 300 7.65 7.10 10.43
cookies and how does it differ from the elasticity 350 8.40 7.20 10.06
of the market demand for fortune cookies? 400 10.00 7.50 10.00
450 12.40 8.00 10.22
The Firm’s Output Decision (Study Plan 12.2) 500 20.70 9.00 11.00
Use the following table to work Problems 4 to 6. a. What is the market price of paper?
Pat’s Pizza Kitchen is a price taker. Its costs are b. What is the market’s output?
Output Total cost c. What is the output produced by each firm?
(pizzas per hour) (dollars per hour)
d. What is the economic profit made or economic
0 10 loss incurred by each firm?
1 21 Output, Price, and Profit in the Short Run
2 30 (Study Plan 12.3)
3 41
4 54 8. In Problem 7, as more and more computer users
read documents online rather than print them,
5 69
the market demand for paper decreases and in
4. Calculate Pat’s profit-maximizing output and the short run the demand schedule becomes
economic profit if the market price is Price Quantity demanded
(dollars (thousands of boxes
(i) $14 a pizza. per box) per week)
(ii) $12 a pizza.
(iii) $10 a pizza. 2.95 500
5. What is Pat’s shutdown point and what is Pat’s 4.13 450
economic profit if it shuts down temporarily? 5.30 400
6. Derive Pat’s supply curve. 6.48 350
7. The market for paper is perfectly competitive 7.65 300
and there are 1,000 firms that produce paper. 8.83 250
The table sets out the market demand schedule 10.00 200
for paper. 11.18 150
296 CHAPTER 12 Perfect Competition

If each firm producing paper has the costs set out Use the following news clip to work Problems 13
in Problem 7, what is the market price and the eco- and 14.
nomic profit or loss of each firm in the short run? Coors Brewing Expanding Plant
9. Fuel Prices Could Squeeze Cheap Flights Coors Brewing Co. of Golden will expand its
Airlines are having difficulty keeping prices low, Virginia packaging plant at a cost of $24 million.
especially as fuel prices keep rising. Airlines have The addition will accommodate a new production
raised fares to make up for the fuel costs. line, which will bottle beer faster. Coors Brewing
American Airlines increased its fuel surcharge by employs 470 people at its Virginia plant. The
$20 a roundtrip, which Delta, United Airlines, expanded packaging line will add another eight jobs.
and Continental matched. Source: Denver Business Journal, January 6, 2006
Source: CNN, June 12, 2008 13. a. How will Coors’ expansion change its mar-
a. Explain how an increase in fuel prices might ginal cost curve and short-run supply curve?
cause an airline to change its output (number b. What does this expansion decision imply
of flights) in the short run. about the point on Coors’ LRAC curve at
b. Draw a graph to show the increase in fuel which the firm was before the expansion?
prices on an airline’s output in the short run. 14. a. If other breweries follow the lead of Coors,
c. Explain why an airline might incur an eco- what will happen to the market price of beer?
nomic loss in the short run as fuel prices rise. b. How will the adjustment that you have de-
scribed in part (a) influence the economic
Output, Price, and Profit in the Long Run profit of Coors and other beer producers?
(Study Plan 12.4)
15. Explain and illustrate graphically how the grow-
ing world population is influencing the world
10. The pizza market is perfectly competitive, and all market for wheat and a representative individual
pizza producers have the same costs as Pat’s Pizza wheat farmer.
Kitchen in Problem 4. 16. Explain and illustrate graphically how the diaper
a. At what price will some firms exit the pizza service market has been affected by the decrease
market in the long run? in the North American birth rate and the devel-
b. At what price will firms enter the pizza market opment of disposable diapers.
in the long run?
11. In Problem 7, in the long run, Competition and Efficiency (Study Plan 12.6)
a. Do firms have an incentive to enter or exit the 17. In a perfectly competitive market in long-run
paper market? equilibrium, can consumer surplus be increased?
Can producer surplus be increased? Can a con-
b. If firms do enter or exit the market, explain
sumer become better off by making a substitu-
how the economic profit or loss of the remain-
tion away from this market?
ing paper producers will change.
18. Never Pay Retail Again
c. What is the long-run equilibrium market
price and the quantity of paper produced? Not only has scouring the Web for the best
What is the number of firms in the market? possible price become standard protocol before
buying a big-ticket item, but more consumers are
Changing Tastes and Advancing Technology employing creative strategies for scoring hot
deals. Comparison shopping, haggling and swap-
(Study Plan 12.5)
ping discount codes are all becoming mainstream
12. If in the long run, the market demand for paper marks of savvy shoppers. Online shoppers can
remains the same as in Problem 8, check a comparison service like Price Grabber
a. What is the long-run equilibrium price of before making a purchase.
paper, the market output, and the economic Source: CNN, May 30, 2008
profit or loss of each firm? a. Explain the effect of the Internet on the de-
b. Does this market experience external economies, gree of competition in the market.
external diseconomies, or constant cost? Illus- b. Explain how the Internet influences market
trate by drawing the long-run supply curve. efficiency.
 Additional Problems and Applications 297

ADDITIONAL PROBLEMS AND APPLICATIONS

You can work these problems in MyEconLab if assigned by your instructor.

What Is Perfect Competition? Price Quantity demanded

(dollars per smoothie) (smoothies per hour)
Use the following news clip to work Problems 19 to 21.
Money in the Tank 1.90 1,000
2.00 950
Two gas stations stand on opposite sides of the road:
Rutter’s Farm Store and Sheetz gas station. Rutter’s 2.20 800
doesn’t even have to look across the highway to know 2.91 700
when Sheetz changes its price for a gallon of gas. When 4.25 550
Sheetz raises the price, Rutter’s pumps are busy. When 5.25 400
Sheetz lowers prices, there’s not a car in sight. Both gas 5.50 300
stations survive but each has no control over the price. Each of the 100 producers of smoothies has the
Source: The Mining Journal, May 24, 2008 following costs when it uses its least-cost plant:
19. In what type of market do these gas stations Average Average
operate? What determines the price of gasoline Output Marginal cost
variable cost total cost
and the marginal revenue from gasoline? (smoothies (dollars per
per hour) additional smoothie) (dollars per smoothie)
20. Describe the elasticity of demand that each of
these gas stations faces. 3 2.50 4.00 7.33
21. Why does each of these gas stations have so little 4 2.20 3.53 6.03
control over the price of the gasoline it sells? 5 1.90 3.24 5.24
6 2.00 3.00 4.67
The Firm’s Output Decision 7 2.91 2.91 4.34
22. The figure shows the costs of Quick Copy, one of 8 4.25 3.00 4.25
many copy shops near campus. 9 8.00 3.33 4.44
a. What is the market price of a smoothie?
Cost (cents per page)

12 MC ATC
b. What is the market quantity of smoothies?
10 c. How many smoothies does each firm sell?
d. What is the economic profit made or econom-
8 ic loss incurred by each firm?
6 24. Cadillac Plant Shuts Down Temporarily, Future
Uncertain
4 Delta Truss in Cadillac [Michigan] is shutting
down and temporarily discontinuing truss pro-
2 duction. Workers fear this temporary shutdown
will become permanent, but the firm announced
0 20 40 60 80 100 that it anticipates that production will resume
Quantity (pages per hour) when the spring business begins.
Source: 9&10 News, February 18, 2008
If the market price of copying is 10¢ a page, a. Explain how the shutdown decision will affect
calculate Quick Copy’s Delta Truss’ TFC, TVC, and TC.
a. Profit-maximizing output. b. Under what conditions would this shutdown
b. Economic profit. decision maximize Delta Truss’ economic
23. The market for smoothies is perfectly competitive. profit (or minimize its loss)?
The following table sets out the market demand c. Under what conditions will Delta Truss start
schedule. producing again?
298 CHAPTER 12 Perfect Competition

Output, Price, and Profit in the Short Run Competition and Efficiency
25. Big Drops in Prices for Crops Make It Tough 30. In a perfectly competitive market, each firm
Down on the Farm maximizes its profit by choosing only the quan-
Grain prices have fallen roughly 50 percent from tity to produce. Regardless of whether the firm
earlier this year. With better-than-expected crop makes an economic profit or incurs an economic
yields, world grain production this year will rise 5 loss, the short-run equilibrium is efficient. Is the
percent from 2007 to a record high. statement true? Explain why or why not.
Source: USA Today, October 23, 2008
Economics in the News
Why did grain prices fall in 2008? Draw a graph
to show that short-run effect on an individual 31. After you have studied Reading Between the Lines
farmer’s economic profit. on pp. 292–293 answer the following questions.
a. What are the features of the global market for
Output, Price, and Profit in the Long Run corn that make it competitive?
26. In Problem 23, do firms enter or exit the market b. If the increase in production during 2009 and
in the long run? What is the market price and 2010 was due entirely to good weather, what
the equilibrium quantity in the long run? will happen to the price and quantity pro-
27. In Problem 24, under what conditions will Delta duced when normal weather returns?
Truss exit the market? c. What will happen to an individual farmer’s
28. Exxon Mobil Selling All Its Retail Gas Stations marginal revenue, marginal cost, average total
Exxon Mobil is not alone among Big Oil exiting cost, and economic profit if the events in part
the retail gas business, a market where profits (b) occur?
have gotten tougher as crude oil prices have d. If the increase in production during 2009 and
risen. Gas station owners say they’re struggling to 2010 was due mainly to a revolution in farm
turn a profit because while wholesale gasoline technology, what will happen to the price and
prices have risen sharply, they’ve been unable to quantity produced when normal weather
raise pump prices fast enough to keep pace. returns?
Source: Houston Chronicle, June 12, 2008 32. Cell Phone Sales Hit 1 Billion Mark
a. Is Exxon Mobil making a shutdown or exit More than 1.15 billion mobile phones were sold
decision in the retail gasoline market? worldwide in 2007, a 16 percent increase in a
b. Under what conditions will this decision max- year. Emerging markets, especially China and
imize Exxon Mobil’s economic profit? India, provided much of the growth as many
c. How might Exxon Mobil’s decision affect the people bought their first phone. Carolina
economic profit of other gasoline retailers? Milanesi, research director for mobile devices at
Gartner, reported that in mature markets, such as
Changing Tastes and Advancing Technology
Japan and Western Europe, consumers’ appetite
29. Another DVD Format, but It’s Cheaper for feature-laden phones was met with new mod-
New Medium Enterprises claims the quality of els packed with TV tuners, global positioning
its new system, HD VMD, is equal to Blu-ray’s satellite functions, touch screens, and cameras.
but it costs only $199—cheaper than the $300 Source: CNET News, February 27, 2008
cost of a Blu-ray player. Chairman of the Blu-ray a. Explain the effects of the increase in global de-
Disc Association says New Medium will fail mand for cell phones on the market for cell
because it believes that Blu-ray technology will phones and on an individual cell-phone pro-
always be more expensive. But mass production ducer in the short run.
will cut the cost of a Blu-ray player to $90.
b. Draw a graph to illustrate your explanation in
Source: The New York Times, March 10, 2008
part (a).
a. Explain how technological change in Blu-ray
production might support the prediction of c. Explain the long-run effects of the increase in
lower prices in the long run. Illustrate your ex- global demand for cell phones on the market
planation with a graph. for cell phones.
b. Even if Blu-ray prices do drop to $90 in the d. What factors will determine whether the price
long run, why might the HD VMD still end of cell phones will rise, fall, or stay the same in
up being less expensive at that time? the new long-run equilibrium?