Exhibit 7-18 A typical firm in a perfectly competitive market As shown in Exhibit 7-18, the perfectly competitive firm is in long-run equilibrium at an output of:

Question

Exhibit 7-18  A typical firm in a perfectly competitive market  As shown in Exhibit 7-18, the perfectly competitive firm is in long-run equilibrium at an output of:

Quizplus · Accepted Answer

In a perfectly competitive market, a firm will produce at the point where marginal cost (MC) equals marginal revenue (MR), and price equals marginal cost. In the long run, firms will adjust their production levels until economic profits are driven to zero. This occurs at the minimum point on the long-run average cost (LRAC) curve, where LRAC equals price. In Exhibit 7-18, this occurs at an output of 400 units per week, where the LRAC curve is tangent to the demand curve at a price of $10. Therefore, the firm is in long-run equilibrium at an output of 400 units per week.

Exhibit 7-18 a Typical Firm in a Perfectly Competitive Market