Figure 10-7

-In Figure 10-7, through which point must a horizontal demand curve pass to yield a long-run equilibrium?

Question

Figure 10-7
 
-In Figure 10-7, through which point must a horizontal demand curve pass to yield a long-run equilibrium?

Quizplus · Accepted Answer

A horizontal demand curve implies that the market is perfectly competitive, meaning any firm can sell as much as they want at the prevailing market price. In the long run, firms will enter or exit the market until economic profits are zero. In the diagram, point A represents the long-run equilibrium where the demand curve intersects the firm's average cost curve at its minimum point. Therefore, a horizontal demand curve must pass through point A to yield long-run equilibrium.

Figure 10-7 -In Figure 10-7, Through Which Point Must a Horizontal Demand