Refer to Figure 23.1 for a perfectly competitive firm.In the long run,this firm would stay in this market only if the market price was equal to or higher than

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms will enter or exit the market based on whether they can earn positive profits or not. In the long run, firms are able to adjust their output and inputs, so that they are producing at the minimum efficient scale (MES) and earning zero economic profit. In this diagram, the MES is at a quantity of 4 and a price of $15. Therefore, if the market price is below $15, the firm will not be able to cover its costs and will exit the market. If the market price is at $15 or above, the firm will be able to cover its costs and stay in the market. Therefore, the answer is C.