Asked by Christopher Flores on Jun 09, 2024
Verified
Which of the following statements about a competitive firm is correct?
A) To maximize profits, a competitive firm should produce the output level at which total revenue is greatest.
B) In long-run equilibrium, a competitive firm will produce at the point of minimum average total costs.
C) A competitive firm will produce in the short run so long as total receipts are sufficient to cover total fixed costs.
D) A competitive firm will close down in the short run whenever price is less than the minimum attainable average total cost.
Long-run Equilibrium
A state in which all factors of production and costs are variable, allowing firms in a perfectly competitive market to make zero economic profit, balancing supply and demand.
Maximum Profits
The highest possible financial gain that a business can achieve in a given period, optimizing revenue while minimizing costs.
- Illustrate the relationship between marginal cost, marginal revenue, price, and average total cost in the context of pure competition.
- Explain the criteria for achieving long-run equilibrium within a completely competitive enterprise.
Verified Answer
SC
Serina CurryJun 14, 2024
Final Answer :
B
Explanation :
In long-run equilibrium, a competitive firm will adjust its output so that it can produce at the point of minimum average total costs. This ensures the firm is as efficient as possible, maximizing its profits by minimizing costs per unit of output.
Learning Objectives
- Illustrate the relationship between marginal cost, marginal revenue, price, and average total cost in the context of pure competition.
- Explain the criteria for achieving long-run equilibrium within a completely competitive enterprise.