In long-run competitive market equilibrium,price equals _______ and economic profit is _______.

Question

Quizplus · Accepted Answer

In the long-run competitive market equilibrium, price equals the minimum of the average total cost, as firms in a perfectly competitive market produce at the lowest point on their average total cost curve in order to maximize profit. Economic profit is zero in this equilibrium because if firms were able to earn positive economic profits, new firms would enter the market and drive down prices until profits were reduced to zero. Therefore, only choice B accurately describes the long-run competitive market equilibrium.

In Long-Run Competitive Market Equilibrium,price Equals _______ and Economic Profit