In a perfectly competitive market, each firm produces at a quantity where price is set
A) equal to marginal cost, in the short run.
B) equal to marginal cost, both in the short run and in the long run.
C) equal to average cost, in the long run.
D) equal to average cost, both in the short run and in the long run.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms produce where price equals marginal cost in both the short run and the long run. In the long run, price also equals average cost, ensuring zero economic profit.

In a Perfectly Competitive Market, Each Firm Produces at a Quantity