In long-run equilibrium, the perfectly competitive firm produces

Question

Quizplus · Accepted Answer

In long-run equilibrium, the perfectly competitive firm produces where P = MC = AC. This is because in a perfectly competitive market, firms are price takers and must produce where their marginal cost equals the market price in order to maximize profits. In the long run, firms can adjust their inputs and scale of production, leading to a situation where they produce at the lowest point on their long-run average cost curve. This is because in the long run, firms can enter or exit the market, leading to a situation where price equals average cost for all firms in the industry. Finally, in the long run, firms will also produce where their long-run average cost curve is tangent to their horizontal demand curve in order to maximize profits. Therefore, all of the responses are correct.

In Long-Run Equilibrium, the Perfectly Competitive Firm Produces