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The long run is the period of time during which all inputs of production can be changed, and the short run is when it is not possible to change all inputs to production, and firms have neither entered nor exited the industry as per the economic opportunity available. Markets are always at equilibrium in the long run.
Long-run equilibrium in a perfectly competitive market is a situation in which entry into and exit from an industry are complete and free, and economic profits are zero, with price (P) equal to average total cost (ATC). So, the long-run competitive equilibrium model models firms in an industry where these conditions are met.
Theoretically, P=minATC is only possible in perfectly competitive markets. For price to be forced to the lowest possible cost of production can only be an output of perfect competition; when dealing with monopolistic competitors, price discriminators, oligopolies, and so forth, price never reaches min ATC.
The long-run competitive equilibrium model is presented through two graphs: one, a supply and demand chart at equilibrium (representing the market), and two, a graph of MC and ATC (representing the firms therein), with production occurring at the intersection of the MC and ATC curves (note: AVC is not required as in other models). Because each firm is competitive, the market demand curve is downward sloping (e.g., firms can sell more units by increasing price).
