In a long-run equilibrium in a perfectly competitive market, firms are selling at a price equal to marginal cost.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms will continue to enter or exit until the price equals the marginal cost of production, resulting in long-run equilibrium. This is because any firm producing at a price higher than its marginal cost will earn economic profits and attract new firms to the industry. Conversely, any firm producing at a price lower than its marginal cost will incur losses and eventually exit the industry. Therefore, in long-run equilibrium, the price will be equal to the marginal cost of production.

In a Long-Run Equilibrium in a Perfectly Competitive Market, Firms