The following figure depicts the short-run cost curves of a perfectly competitive firm.

-Refer to the figure above.A firm could choose to produce a quantity of 60 in the long run if ________.
A) this firm could not exit the industry
B) the firm was experiencing decreasing returns to scale
C) barriers to entry existed
D) the firm expected to price to rise in the future

Question

The following figure depicts the short-run cost curves of a perfectly competitive firm.
 
-Refer to the figure above.A firm could choose to produce a quantity of 60 in the long run if ________.
A) this firm could not exit the industry 
B) the firm was experiencing decreasing returns to scale 
C) barriers to entry existed 
D) the firm expected to price to rise in the future

Quizplus · Accepted Answer

In the long run, a perfectly competitive firm will produce at the minimum point of its average total cost curve. In this figure, that point is where the average total cost curve intersects the marginal cost curve at a quantity of 60. However, if barriers to entry exist, other firms cannot easily enter the market to compete, so the existing firm can continue to produce and earn profits in the long run. Therefore, option C is the correct answer. Options A, B, and D are incorrect because they do not explain why the firm could choose to produce a quantity of 60 in the long run.

The Following Figure Depicts the Short-Run Cost Curves of a Perfectly