In short-run equilibrium in perfect competition,

Question

Quizplus · Accepted Answer

In short-run equilibrium in perfect competition, the market price is where the supply and demand curves intersect. At this price, each firm will produce the quantity where its marginal cost equals the market price. This means that the amount sold by existing firms at the market price is exactly equal to the quantity consumers demand at that price. Therefore, D is the correct choice. A is incorrect because profit is measured as P - ATC only in the short run, but it may not be positive. B is incorrect because ATC - P would result in a negative profit. C is incorrect because profit may be negative in the short run. E is incorrect because firms may wish to enter the market in the long run if there are positive profits.

In Short-Run Equilibrium in Perfect Competition