When a perfectly competitive firm is in long-run equilibrium:

Question

Quizplus · Accepted Answer

In long-run equilibrium, a perfectly competitive firm's total revenues would equal the sum of its total explicit and implicit costs (option A). In addition to that, the firm would be operating at the minimum of its LRAC (Long-Run Average Cost) curve, which implies that the firm is producing at the most efficient scale of production (option B). Lastly, the firm would earn zero economic profit in the long run because of the ease of entry and exit for new firms in the market, resulting in no barriers to entry to drive out economic profits (option C). Therefore, all of the above options (A, B, and C) are true when a perfectly competitive firm is in long-run equilibrium.

When a Perfectly Competitive Firm Is in Long-Run Equilibrium