In a perfectly competitive market, a firm in long-run equilibrium will be operating

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms cannot earn economic profits in the long run due to free entry and exit of firms. Therefore, in the long run, firms in a perfectly competitive market will produce at the minimum point of their long-run average cost curve (LRAC). At this point, the firm is operating at the lowest possible average cost per unit of output, given the available technology and resources. Choosing any point other than the minimum of the LRAC would mean that the firm is not minimizing its costs and thus not maximizing its profits. Therefore, the correct answer is C, at the minimum of the long-run average cost curve.

In a Perfectly Competitive Market, a Firm in Long-Run Equilibrium