Asked by Sierra Ballard on Jul 05, 2024
Verified
In perfectly competitive long-run equilibrium:
A) all firms make positive economic profits.
B) all firms produce at the minimum point of their average total cost curves.
C) the industry supply curve must be upward-sloping.
D) all firms face the same price,but the value of marginal cost will vary directly with firm size.
Average Total Cost
The per unit cost of production, calculated by dividing the total cost by the quantity of output produced.
Economic Profits
Economic profits consist of the total revenue generated by a business minus both its explicit and implicit costs, reflecting the actual profitability including opportunity costs.
- Examine the prerequisites for achieving a long-term equilibrium in an entirely competitive marketplace, focusing on the condition of no economic profits.
- Elucidate the effectiveness of resource distribution in perfect competition and identify the specific conditions that allow this to happen.
Verified Answer
VT
Victor TrevinoJul 11, 2024
Final Answer :
B
Explanation :
In long-run equilibrium, firms will produce at the minimum point of their average total cost curves. This is because in perfect competition, firms have no pricing power and must accept the market price. If a firm were to produce at a point above the minimum of its average total cost curve, it would not be able to compete with other firms in the market and would eventually exit the market. As a result, all firms will produce at the minimum point of their average total cost curves, ensuring productive efficiency.
Learning Objectives
- Examine the prerequisites for achieving a long-term equilibrium in an entirely competitive marketplace, focusing on the condition of no economic profits.
- Elucidate the effectiveness of resource distribution in perfect competition and identify the specific conditions that allow this to happen.