In the long run, perfectly competitive firms are in equilibrium when:

Question

Quizplus · Accepted Answer

In the long run, perfectly competitive firms are in equilibrium when price is equal to the long-run marginal cost. This is because in the long run, firms can adjust their inputs and level of production to minimize their costs and achieve a level of production where price equals marginal cost. If price were to exceed long-run marginal cost, firms would increase their production to take advantage of the higher prices, leading to a decrease in price. Conversely, if price were less than the long-run average cost, firms would not be covering their costs, leading to a decrease in supply and an increase in price. Therefore, in the long run, equilibrium occurs when price equals long-run marginal cost.

In the Long Run, Perfectly Competitive Firms Are in Equilibrium