In long-run equilibrium of a competitive market, the number of firms in the markets adjusts so that all of the market demand is satisfied at a price equal to:

Question

Quizplus · Accepted Answer

In the long-run equilibrium of a competitive market, firms will enter or exit the market until the price is equal to the minimum average total cost. This is because firms that can produce at a lower cost than the market price will enter the market, increasing supply and driving the price down. Conversely, firms that cannot produce at a lower cost than the market price will exit the market, decreasing supply and driving the price up. The equilibrium price will be where the remaining firms are producing at the minimum average total cost, ensuring that they are making a normal profit (zero economic profit). Therefore, the correct choice is B, minimum average total cost.

In Long-Run Equilibrium of a Competitive Market, the Number of Firms