The figure given below shows the revenue and cost curves of a perfectly competitive firm.Figure 10.5
MC: Marginal cost curve
MR: Marginal revenue curve.ATC: Average-total-cost curve
AVC: Average-variable-cost curve
-Which of the following statements is true in the context of the long run?

Question

The figure given below shows the revenue and cost curves of a perfectly competitive firm.Figure 10.5
  MC: Marginal cost curve
MR: Marginal revenue curve.ATC: Average-total-cost curve
AVC: Average-variable-cost curve
-Which of the following statements is true in the context of the long run?

Quizplus · Accepted Answer

In the long run, all factors of production are variable and the firm can adjust its production level to maximize profits. This means that the firm can vary all the factors of production, which rules out options A and B. Option D is not necessarily true as economic profit may be zero in the long run due to competition. Option E is also not necessarily true as the firm is in a perfectly competitive market with many smaller firms, which reduces the likelihood of a single large firm acquiring market power. Therefore, the best choice is (C).

The Figure Given Below Shows the Revenue and Cost Curves