In long-run equilibrium for both a competitive market and monopolistic competition accounting profit is zero. price...

In long-run equilibrium for both a competitive market and monopolistic competition

accounting profit is zero.

price equals marginal revenue.

long-run average cost is minimized.

economic profit is zero.*

productive efficiency is achieved.

Expert Solution

In the long-run all factors of production become variable; therefore, the ATC curve will make a tangent on the demand curve. The equilibrium condition is still (MC = MR); but since the ATC curve is on the demand curve, the firm can’t not enjoy any economic profit but should be on break-even level. Therefore, the point E is equilibrium. At this point OQ quantity is produced at OP price, and there is no economic profit.

Conclusion: Therefore, in both the cases there would be no economic profit.

Rahul Sunny answered 2 years ago

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