Under perfect competition, in long-run equilibrium, _____.

Question

Under perfect competition, in long-run equilibrium, _____.​

Quizplus · Accepted Answer

In long-run equilibrium, the demand curve facing individual firms will fall to the level tangent to the minimum average total cost curve. This means that firms will produce at the point where their marginal cost equals their marginal revenue, which is also equal to their average total cost. This results in zero economic profits, as firms are only able to cover their opportunity costs. Under perfect competition, there are no barriers to entry and firms are price takers, so they cannot earn economic profits in the long run. However, the statement in option A is only true for the short run. Option B is incorrect because perfect competition does not have barriers to entry, and option D is incorrect because firms will produce where marginal revenue equals marginal cost, not where it exceeds it by the greatest dollar amount. Finally, option E is only true if all firms have the same marginal cost, which may not always be the case.

Under Perfect Competition, in Long-Run Equilibrium, _____.​

Under Perfect Competition, in Long-Run Equilibrium, _____.