When all firms and potential firms in a market have the same cost curves,the long-run equilibrium of a competitive market with free entry and exit will be characterized by which firms

Question

Quizplus · Accepted Answer

In a competitive market with free entry and exit, firms will enter or exit the market until economic profits are driven to zero in the long run. When all firms have the same cost curves, they will all produce at a point of efficient scale, where average total cost is minimized. Thus, the long-run equilibrium of the market will be characterized by firms operating at efficient scale, rather than earning economic profit or facing the prospect of future losses. Choice D is incorrect because collusion among firms to raise market prices would violate the assumption of perfect competition in this scenario.

When All Firms and Potential Firms in a Market Have