In the long run under perfect competition

Question

Quizplus · Accepted Answer

Under perfect competition, there are no barriers to entry or exit, and all firms produce identical products. This means that if a firm tries to charge a higher price than the market equilibrium, consumers will switch to another firm, resulting in loss of sales for that firm. On the other hand, if a firm charges a lower price, it will not be able to cover its costs and will eventually exit the market. Therefore, in the long run, firms in perfect competition aim to operate at the minimum point of their average total cost (ATC) curve, which allows them to produce at the lowest cost possible and earn normal profits, where total revenue equals total cost. Thus, choice C is the correct answer.

In the Long Run Under Perfect Competition