Refer to Figure 26.1. The output level that will be produced by this firm in the long run is A) Q_1. B) Q_2. C) Q_3. D) Q_4.

Question

Quizplus · Accepted Answer

In the long run, firms in a perfectly competitive market will adjust their output until they reach their minimum efficient scale (MES) and produce at the point where average total cost is minimized. In this diagram, the MES occurs at point S1, where the firm produces QS1 units of output at a cost of S1U1B13. The firm will want to produce at this level in the long run to maximize profits, so the answer is QS1U1B13.S1U1B0.