If the LAC curve of a potential entrant into an imperfectly competitive industry lies everywhere above the residual demand curve, the current level of industry output necessarily:
A)maximizes industry profit.
B)falls short of the limit output.
C)is equal to the limit output.
D)exceeds the limit output.

Question

Quizplus · Accepted Answer

If the LAC curve of a potential entrant is above the residual demand curve, it means the entrant cannot produce at a cost that is competitive with the current market price, indicating that the current industry output is already at a level that deters entry, thus exceeding the limit output.

If the LAC Curve of a Potential Entrant into an Imperfectly