Which of the following explains why in the long run the purely competitive firm produces at...

Which of the following explains why in the long run the purely competitive firm produces at lowest possible cost? Select one:

a. There are no advertising costs to add to production costs.

b. The demand is equal to average revenue which equals marginal revenue curve is perfectly elastic and intersects the long run average cost curve at its lowest point,thus, the firm produces at full capacity.

c. There are no economic profits.

d. All of the above are correct.

Solutions

Expert Solution

"B"

The demand is equal to average revenue which equals marginal revenue curve is perfectly elastic and intersects the long run average cost curve at its lowest point, thus, the firm produces at full capacity. the answer is "B".

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Why are economic profits not possible in the long run in a purely competitive market? A....

Why are economic profits not possible in the long run in a purely competitive market? A. Each firm is too small to make profit. B. More firms will leave a profitable market, driving prices down. C. Profitable markets drive prices too high and comsumers stop buying. D. New firms will enter the matket and drive prices down.

When a purely competitive firm earns a normal economic total profit in the long run, it...

When a purely competitive firm earns a normal economic total profit in the long run, it produces a quantity Q of its final product where $Price = $Marginal Cost and also $Price = Minimum Average Total Cost. Why are these price and cost equalities considered to be beneficial for the entire economy?

2. Competitive Firm Equilibrium Long run, Exit/Entry in Long Run, Explain why a competitive firm can...

2. Competitive Firm Equilibrium Long run, Exit/Entry in Long Run, Explain why a competitive firm can only earn normal economic profit (define) in long run. 3. Define monopoly, explain why the MR and P( AR) curve for a monopolist are different and why they are downward sloping and why does MR lie below the AR curve. Compute Monopoly P and Q and profits; compare monopoly price/quantity/profits with a competitive market price and quantity. Compute CS, PS, TS for monopoly as...

Diagram a purely (product market) competitive firm in long-run equilibrium. Be sure to show both the...

Diagram a purely (product market) competitive firm in long-run equilibrium. Be sure to show both the market and the representative firm. Next, on the same diagram, show what happens to the market and the representative firm if the market demand for the product falls dramatically, for instance, due to bad press. Briefly explain your conclusions. Please show me your thought process. Please explain it as if you are telling it to someone who has no clue about economics.

Which of the following is true of a perfectly competitive firm in long-run equilibrium? A) it...

Which of the following is true of a perfectly competitive firm in long-run equilibrium? A) it will minimize its average total cost B) the market demand curve is horizontal C) the market supply curve is horizontal D) marginal cost is minimized E) it will charge a price above its marginal cost

Which of the following explains contractionary monetary policy in the long run?

Which of the following explains contractionary monetary policy in the long run? Contractionary monetary policy shifts aggregate demand to the left, moving the economy from long run equilibrium to a short-run equilibrium with a lower price level and a lower level of real gross domestic product (GDP). In the long run, as resource prices rise, the short-run aggregate supply curve shifts to the left, causing the economy to contract. Contractionary monetary policy shifts aggregate demand to the right, moving the economy from...

When in a purely competitive industry is in long run equilibrium, what equality is true? What...

When in a purely competitive industry is in long run equilibrium, what equality is true? What kind of efficiency (or efficiencies) is achieved in long run equilibrium and what equality represents the efficiency (or efficiencies)?

1. a. Graph a competitive firm and market in long-run equilibrium; Explain why it is a...

1. a. Graph a competitive firm and market in long-run equilibrium; Explain why it is a long run equilibrium. b. Graph and explain what happens in the short run with a supported price floor. c. Assume this is an increasing cost industry. Graph and explain each step through the LR. d. Show the same but for a price ceiling. 2. Show that whether the producers or consumers directly pay the per-unit tax does not matter. Explain what does determine who...

Does a monopolistically-competitive firm have zero economic profits in the long run? Why or why not?...

Does a monopolistically-competitive firm have zero economic profits in the long run? Why or why not? How might it be different from perfect competition in the long run?

Which of the following is not a characteristic of long run equilibrium in a monopolistically competitive...

Which of the following is not a characteristic of long run equilibrium in a monopolistically competitive market? A. Marginal revenue equals marginal cost. B. Selling price is greater than marginal cost. C. Production is at minimum average total cost. D. Selling price equals average total cost.

Subjects