Asked by Taylor Eakin on Jul 15, 2024
Verified
When a purely competitive firm is in long-run equilibrium, price is equal to
A) marginal cost but may be greater or less than average cost.
B) minimum average total cost and also to marginal cost.
C) minimum average cost but may be greater or less than marginal cost.
D) marginal revenue but may be greater or less than both average and marginal cost.
Long-run Equilibrium
A state in which supply equals demand and all factors of production and markets are in balance, typically considered in the context of perfect competition.
Purely Competitive
A market scenario where products are identical, leading to numerous sellers and buyers where no single entity can influence market prices.
Marginal Cost
The cost of producing one additional unit of a product or service, crucial for decision-making about production levels and pricing.
- Demonstrate the linkage among marginal cost, marginal revenue, price, and average total cost under the circumstances of pure competition.
Verified Answer
BR
Brian ReyesJul 19, 2024
Final Answer :
B
Explanation :
In long-run equilibrium, a purely competitive firm will adjust its output so that price equals both the marginal cost (MC) and the minimum average total cost (ATC), ensuring that the firm is producing at its most efficient point and earning normal profit.
Learning Objectives
- Demonstrate the linkage among marginal cost, marginal revenue, price, and average total cost under the circumstances of pure competition.