Which of the following characterizes a firm that is in long-run perfectly competitive equilibrium where profits are maximized?

Question

Quizplus · Accepted Answer

In long-run perfect competition, firms will only earn normal profits due to easy entry and exit of the industry. This means that the price of the good will be equal to the minimum average total cost (ATC) of production, as firms will not be able to charge a higher price in the long run. A positive economic profit is not possible in long-run perfect competition as other firms will enter the industry and bring down prices until only normal profits are earned. Price equaling marginal cost is a characteristic of short-run perfect competition, but in long-run perfect competition, price will equal minimum ATC.

Which of the Following Characterizes a Firm That Is in Long-Run