At the point of long-run equilibrium for a perfectly competitive firm, price
A) equals minimum average total cost, which allows just a normal profit
B) exceeds minimum average total cost, which allows an economic profit
C) lies below minimum average variable cost and the firm shuts down
D) lies below minimum average total cost and the firm shuts down

Question

Quizplus · Accepted Answer

In the long-run equilibrium of a perfectly competitive market, firms make zero economic profit, meaning price equals the minimum average total cost, allowing for just a normal profit. This is because any economic profit would attract new firms into the industry, increasing supply and driving down prices until only normal profit is possible.

At the Point of Long-Run Equilibrium for a Perfectly Competitive