Figure 14-14
-Refer to Figure 14-14. When the market is in long-run equilibrium at point W in panel (b), the firm represented in panel (a) will

Question

Figure 14-14  
-Refer to Figure 14-14. When the market is in long-run equilibrium at point W in panel (b), the firm represented in panel (a) will

Quizplus · Accepted Answer

In long-run equilibrium, the price (P) will equal the minimum average total cost (ATC) for the firm, represented by point W in panel (a). At this point, the firm will have a zero economic profit because its revenue (P) is equal to its total cost (ATC). Therefore, choice A is correct. Choice B cannot be correct, as a negative accounting profit would indicate that the firm's costs are higher than its revenue, which would not allow it to continue operating. Choice C also cannot be correct, as the firm is already operating in long-run equilibrium, meaning it is earning a normal rate of return and has no reason to exit the market. Choice D is not the best answer, as increasing production would likely lead to higher costs and lower profitability for the firm.