-The figure above shows the marginal revenue and long- run cost curves for a perfectly competitive firm. All other firms in the industry have identical curves. Which of the following statements is true?

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms earn zero economic profit in the long run, which means their price equals their average cost, not exceeding it. Entry of firms occurs if there is economic profit, but since all firms have identical curves and are in a perfectly competitive market, any economic profit would be eroded by new entries until there is no economic profit left, implying equilibrium has been reached.

-The Figure Above Shows the Marginal Revenue and Long- Run