Assuming a horizontal long-run market supply curve,which of the following statements is (are)TRUE about competitive firms in the long run?

Question

Quizplus · Accepted Answer

In the long run, firms in a competitive market will produce where P=MC (point of efficient production), which guarantees that the firms are producing at the minimum point of their average cost curve. When economic profits exist in the short run, firms will have an incentive to enter the market, which increase supply, driving down price towards the minimum of the average cost curve. This process will continue until firms earn normal profits, where P=AC (point of zero profit). Therefore, in the long run, competitive firms produce where P=MC and earn zero economic profit, hence all of the above statements are true.

Assuming a Horizontal Long-Run Market Supply Curve,which of the Following