In long-run equilibrium, a firm in a perfectly competitive industry will produce at the point where:
A)marginal cost equals average total cost.
B)total revenue is maximized.
C)marginal cost equals average variable cost.
D)its opportunity cost is lowest.
E)price equals average fixed cost.

Question

Quizplus · Accepted Answer

In the long-run equilibrium of a perfectly competitive industry, firms will produce at the point where MC=ATC. This is because in the long run, firms are able to adjust their inputs, including capital, in order to minimize their costs of production. Thus, they will produce at the point where there are no further cost savings to be had, which occurs when MC=ATC. At this point, the firm will be earning zero economic profit, but will be producing the output level that maximizes consumer surplus.

In Long-Run Equilibrium, a Firm in a Perfectly Competitive Industry