For a perfectly competitive firm at its long-run equilibrium

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms operate at a long-run equilibrium where Price (P) equals Marginal Revenue (MR) which also equals Marginal Cost (MC), and the firms produce at minimum Average Cost (AC). This is the most efficient output level where all resources are utilized effectively and economic profit is zero. Therefore, option A is correct. Option B and D are incorrect because in a perfectly competitive market, firms cannot charge a higher price than the equilibrium price (P), so MR cannot be greater than P. Also, opportunity costs are always present, regardless of the market structure. Option C is partially incorrect because, in the long run, firms must earn zero economic profit, but they can still earn accounting profits.

For a Perfectly Competitive Firm at Its Long-Run Equilibrium