Exhibit 9-1 -Refer to Exhibit 9-1. Which of the following describes a long-run competitive equilibrium? A)When market demand is at D₂, each firm produces more than 75 units. B)When market demand is at D₂, each firm produces 75 units. C)When market demand is at D₂, each firm produces fewer than 75 units. D)When market demand is at D₂, each firm produces 250,000 units. E)When price is P₂, each firm produces 250,000 units.

Question

Quizplus · Accepted Answer

In a long-run competitive equilibrium, firms will produce at the minimum efficient scale of production, where average total cost is minimized. This occurs where the long-run supply curve intersects the demand curve at point E, which corresponds to a price of P₂ and a quantity of 450 units. Each firm will produce 75 units at this price and quantity.

Exhibit 9-1 -Refer to Exhibit 9-1. Which of the Following Describes a Following