Figure 10-6

-At its long-run equilibrium level of output, the demand curve facing an individual perfectly competitive firm is tangent to its

Question

Figure 10-6
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-At its long-run equilibrium level of output, the demand curve facing an individual perfectly competitive firm is tangent to its

Quizplus · Accepted Answer

At the long-run equilibrium level of output, the perfectly competitive firm produces at the minimum point of its long-run average cost curve. This also means that the price at which the firm sells its product is equal to the minimum point of the long-run average cost curve. Therefore, the demand curve facing the firm (which is perfectly elastic in a perfectly competitive market) will be tangent to its long-run average cost curve, as this is the point where price equals marginal cost and the firm earns zero economic profit.

Figure 10-6 ​

Figure 10-6