Which of the following statements best describes what occurs in long-run equilibrium under perfect competition?

Question

Quizplus · Accepted Answer

In long-run equilibrium under perfect competition, firms will produce at an output level where the demand curve facing individual firms falls to the level tangent to the minimum average total cost curve. This implies that firms will be producing at the lowest possible cost and earning only normal profits. Firms cannot earn economic profits because there are no barriers to entry in a perfectly competitive market. The level of output where marginal revenue exceeds marginal cost by the greatest dollar amount is the profit-maximizing level of output, which is not necessarily the same as the long-run equilibrium level of output. Price equaling minimum average fixed cost is not necessarily true either, as firms need to cover all their costs to be profitable in the long run.

Which of the Following Statements Best Describes What Occurs in Long-Run