For a perfectly competitive firm in long- run profit- maximizing equilibrium,
A) marginal revenue is greater than marginal cost.
B) price is greater than marginal cost.
C) economic profits are greater than zero.
D) average fixed costs are at the maximum.
E) price equals minimum short- run and long- run average total cost.

Question

Quizplus · Accepted Answer

In long-run profit-maximizing equilibrium, a perfectly competitive firm will produce at the point where price equals minimum short-run and long-run average total cost (LRATC). This ensures that the firm is producing at the lowest possible cost while still earning normal profits. If the firm were to produce at a higher level of output, it would incur higher costs and earn lower profits. If it were to produce at a lower level of output, it would not be maximizing profits. Therefore, option E is the correct answer.

For a Perfectly Competitive Firm in Long- Run Profit- Maximizing