In long-run equilibrium, a competitive firm produces where P = MR = MC = minimum ATC and the firm earns normal economic profits.

Question

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In long-run equilibrium, a competitive firm will adjust its output so that price (P) equals marginal revenue (MR), which equals marginal cost (MC), and this point of production will also be where average total cost (ATC) is minimized. At this point, the firm earns normal economic profits, meaning it covers all its opportunity costs but does not earn excess profits.

In Long-Run Equilibrium, a Competitive Firm Produces Where P =