Table : TABLE 7-4 Summary of the Perfectly Competitive Firm’s Profitability and Production Conditions
Profitability condition
(minimum ATC = break-even price)		 Result
P > minimum ATC Firm profitable. Entry into industry in the long run.
P = minimum ATC Firm breaks even. No entry into or exit from industry in the long run.
P < minimum ATC Firm unprofitable. Exit from industry in the long run.
Production condition
(minimum AVC = shut-down price)		 Result
P > minimum AVC Firm produces in the short run. If P < minimum ATC, firm covers variable cost and some but not all of fixed cost. If P > minimum ATC, firm covers all variable cost and fixed cost.
P = minimum AVC Firm indifferent between producing in the short run or not. Just covers variable cost.
P < minimum AVC Firm shuts down in the short run. Does not cover variable cost.