SHORT-RUN EQUILIBRIUM OF THE PERFECTLY COMPETITIVE FIRM UNDER DIFFERENTIAL COST CONDITIONS
IN THIS VIDEO I HAVE EXPLAINED THE SHORT-RUN EQUILIBRIUM OF A PERFECTLY COMPETITIVE FIRM WHEN THE FIRMS FACE DIFFERENTIALCOST CONDITIONS. DIFFERENCES IN COST CONDITIONS ARISE DUE TO HETEROGENEITY OF THE FACTORS OF PRODUCTION DEPLOYED BY THE FIRMS. FIRMS THAT DEPLOY THE EFFICIENT RESOURCES EXPERIENCE HIGHER PRODUCTIVITY RELATIVE TO OTHER FIRMS AND HENCE THEIR COSTS ARE LOWER THAN THE OTHER FIRMS. FIRMS DEPLOYING LESS EFFICIENT RESOURCES HAVE HIGHER COSTS. HENCE IN THE SHORT RUN UNDER DIFFERENTIAL COST CONDITIONS, SOME FIRMS EARN SUPER-NORMAL PROFIT, SOME FIRMS EWARN ONLY NORMAL PROFIT AND SOME FIRMS INCUR ABNORMAL LOSS.