In long-run competitive equilibrium SRATC = LRATC, because if SRATC LRATC (at the quantity of output at which MR = MC) firms would

Question

In long-run competitive equilibrium SRATC = LRATC, because if SRATC > LRATC (at the quantity of output at which MR = MC) firms would

Quizplus · Accepted Answer

In long-run competitive equilibrium, firms adjust their plant size and production levels to minimize costs. If SRATC (Short-Run Average Total Cost) is greater than LRATC (Long-Run Average Total Cost) at the output level where Marginal Revenue (MR) equals Marginal Cost (MC), firms have an incentive to change their plant size to produce their current output more efficiently and at a lower cost, thus moving towards the LRATC. This adjustment ensures that firms are operating at the minimum point of their LRATC curve in the long run, optimizing their production and minimizing costs.

In Long-Run Competitive Equilibrium SRATC = LRATC, Because If SRATC