In the long run in perfect competition:

Question

Quizplus · Accepted Answer

In the long run in perfect competition, firms are allocatively efficient because they produce at a point where price equals marginal cost (P=MC), ensuring that resources are allocated in the most efficient manner possible. This condition does not necessarily mean they produce where price equals average fixed cost, nor do they make abnormal profits since any abnormal profits would attract new firms into the industry, driving down prices and profits to a normal level. Productive inefficiency is also not characteristic of the long-run equilibrium in perfect competition, as firms tend to operate at the lowest point on their average total cost curve.

In the Long Run in Perfect Competition