Asked by PERLA MENDIOLA on May 16, 2024
Verified
In long-run equilibrium, a competitive firm produces where P = MR = MC = minimum ATC and the firm earns normal economic profits.
Long-Run Equilibrium
A state in which all factors of production can be adjusted, allowing firms to enter or exit the market, resulting in a situation where economic profits are zero in a perfectly competitive market.
P = MR
An economic principle where the price (P) of a product equals its marginal revenue (MR), often applied in perfectly competitive markets.
Minimum ATC
The lowest point on the Average Total Cost curve, where a firm is producing at the most cost-efficient level.
- Apprehend the criteria for long-term equilibrium in completely competitive markets and the securing of normal economic earnings.
Verified Answer
AB
Ahmad BilalMay 20, 2024
Final Answer :
True
Explanation :
In long-run equilibrium, a competitive firm will adjust its output so that price (P) equals marginal revenue (MR), which equals marginal cost (MC), and this point of production will also be where average total cost (ATC) is minimized. At this point, the firm earns normal economic profits, meaning it covers all its opportunity costs but does not earn excess profits.
Learning Objectives
- Apprehend the criteria for long-term equilibrium in completely competitive markets and the securing of normal economic earnings.