In long-run equilibrium a perfectly competitive firm will operate where the price is
A)greater than MR but equal to MC and minimum ATC.
B)greater than MR and MC,but equal to minimum ATC.
C)greater than MC and minimum ATC,but equal to MR.
D)equal to MR,MC and minimum to ATC.

Question

Quizplus · Accepted Answer

In perfect competition, a firm is a price taker, meaning it cannot influence the market price. Therefore, it will produce where MR = MC to maximize profits. In the long run, firms can enter or exit the industry, which will adjust the market supply and demand until the price is equal to the minimum ATC. Therefore, in the long run equilibrium, a perfectly competitive firm will operate where the price is equal to MR, MC, and minimum ATC. This is why option D is the correct choice.

In Long-Run Equilibrium a Perfectly Competitive Firm Will Operate Where