Assume the following for a certain industry: (l) there is no incentive for firms to enter or exit the industry; (2) for some firms in the industry, short-run average total cost is greater than long-run average total cost at the level of output where marginal revenue equals marginal cost; (3) all firms in the industry are currently producing the quantity of output at which marginal revenue equals marginal cost. Is the industry in long-run competitive equilibrium?

Question

Quizplus · Accepted Answer

The industry is not in long-run competitive equilibrium because of statement 2, which indicates that some firms can reduce costs by adjusting their scale of operation, implying that the current situation is not the most efficient or sustainable in the long run.

Assume the Following for a Certain Industry: (L) There Is