Asked by Oguche Agnebb on Jul 16, 2024
Verified
A competitive firm is producing 500 units of output and its efficient scale is 400 units of output. Can the market in which this firm operates be in a long-run equilibrium? Briefly explain.
Efficient Scale
The level of production that minimizes the average total cost of producing a product or service.
Long-Run Equilibrium
A state in which all firms in a market are making zero economic profit, leading to a situation where no firms enter or exit the industry.
- Distinguish between the short run and long run in economic analysis, particularly in terms of firm behavior and market dynamics.
- Review the conditions needed for long-run equilibrium in competitive markets and explore the adaptation process to changes in demand.
Verified Answer
PK
Prithvi KothakondaJul 20, 2024
Final Answer :
No, the market cannot be in a long-run equilibrium because in such an equilibrium firms produce at their efficient scale.
Learning Objectives
- Distinguish between the short run and long run in economic analysis, particularly in terms of firm behavior and market dynamics.
- Review the conditions needed for long-run equilibrium in competitive markets and explore the adaptation process to changes in demand.
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