When a purely competitive industry is in long-run equilibrium, which statement is true?
A) Average total cost is less than marginal cost.
B) Price and average total cost are equal.
C) Marginal cost is at its maximum level.
D) Marginal revenue is greater than price.

Question

Quizplus · Accepted Answer

In long-run equilibrium, a purely competitive industry will produce output at the minimum point on its average total cost curve, where price and average total cost are equal. This is because firms that are unable to produce at this level will exit the industry in the long run, driving down the supply and increasing the price until it reaches the equilibrium level where price equals average total cost. Marginal cost and marginal revenue will also be equal to price at this point. Therefore, option B is the correct answer.

When a Purely Competitive Industry Is in Long-Run Equilibrium, Which