Which of the following statements about a perfectly competitive industry in long- run equilibrium is true?

Question

Quizplus · Accepted Answer

In long-run equilibrium of a perfectly competitive industry, each firm is producing at the minimum point on its LRAC curve, which means that they are producing at the most efficient level possible. This also means that they are not able to reduce costs any further without the introduction of new technology or other innovations. In this state, there is no incentive for firms to undertake any investments in new technologies and innovations since their profits are zero in the long-run equilibrium. This is why choice E is also incorrect. Choices A, B, and C are all incorrect because in long-run equilibrium, firms only earn a normal profit (zero economic profit) and not any excess profit (as suggested in choice A) or tolerable losses (as suggested in choice B). Firms do not have to exhibit economies of scale to be in a long-run equilibrium.

Which of the Following Statements About a Perfectly Competitive Industry