In a perfectly contestable market in the long run, each firm
A)produces at the minimum point on its long-run average total cost curve.
B)earns a profit below its opportunity cost of capital.
C)avoids making capital expenditures.
D)All of the responses are correct.

Question

Quizplus · Accepted Answer

In a perfectly contestable market, new firms can enter and exit the market with ease, leading to firms facing competition at all times. This competition leads to firms producing at the minimum point on their long-run average total cost curve, as they must keep their costs as low as possible to remain competitive.

In a Perfectly Contestable Market in the Long Run, Each