If, in long run equilibrium, the competitive price of some good is $16.67, then, for each and every firm in the industry, A)marginal cost average cost = $16.67. B)marginal cost average cost. E)$16.67 = marginal cost

Question

If, in long run equilibrium, the competitive price of some good is $16.67, then, for each and every firm in the industry, A)marginal cost > average cost = $16.67. B)marginal cost < average cost = $16.67. C)$16.67 = marginal cost = average cost. D)$16.67 = marginal cost > average cost. E)$16.67 = marginal cost < average cost.

Quizplus · Accepted Answer

In long run equilibrium, firms produce at the minimum efficient scale, where average cost is at its lowest point. In a perfectly competitive market, the price equals marginal cost, which is equal to the minimum average cost. Therefore, for each and every firm in the industry, marginal cost is equal to average cost, which is equal to $16.67.

If, in Long Run Equilibrium, the Competitive Price of Some