What does the long-run equilibrium of a perfectly competitive market suggest?
A)That the price is equal to the lowest SRAC but not necessarily the lowest LRAC.
B)That the price is equal to the lowest LRAC but not necessarily the lowest SRAC.
C)That the price is equal to both the lowest SRAC and the lowest LRAC.
D)That price cannot equal marginal cost.

Question

Quizplus · Accepted Answer

In the long run, perfectly competitive firms will produce at the point where price equals marginal cost and average total cost. This is the lowest point on the LRAC curve, so the price will be equal to both the lowest SRAC and the lowest LRAC.

What Does the Long-Run Equilibrium of a Perfectly Competitive Market