Asked by Michelle McDade on Jul 29, 2024
Verified
Refer to Figure 14-7. When the market is in long-run equilibrium at point W in graph (b) , the firm represented in graph (a) will
A) have a zero economic profit.
B) have a negative accounting profit.
C) exit the market.
D) choose to increase production to increase profit.
Long-Run Equilibrium
A state in a market where all factors of production are fully utilized, leading to a situation where supply equals demand, with no external pressures to change.
Economic Profit
The difference between total revenue and total costs, including both explicit and implicit costs, representing true profitability.
Increase Production
The process of raising the output or quantity of goods and services produced by a firm or country.
- Determine the circumstances that lead to companies experiencing zero, positive, or negative economic returns.
Verified Answer
VG
vishesh goyalJul 30, 2024
Final Answer :
A
Explanation :
In long-run equilibrium, firms in perfectly competitive markets produce where price equals marginal cost and average total cost, resulting in zero economic profit. This is depicted at point W in graph (b), where the firm's price equals its average total cost.
Learning Objectives
- Determine the circumstances that lead to companies experiencing zero, positive, or negative economic returns.