When all firms and potential firms in a market have the same cost curves, the long-run equilibrium of a competitive market with free entry and exit will be characterised by firms:

Question

Quizplus · Accepted Answer

When all firms and potential firms in a market have the same cost curves, they will all produce at the same efficient scale, which is the quantity where average total cost is minimized. In the long run, this will lead to competition and drive prices down to the minimum point of the average cost curve, resulting in small levels of profit or, in some cases, losses. Firms cannot band together to raise prices as there are still potential entrants in the market who can produce at the same cost level, and free entry and exit allows them to do so.

When All Firms and Potential Firms in a Market Have