Question

In: 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

Solutions

Expert Solution

Ans) A) it will minimize its average total cost is the correct option. At profit maximisation, in perfect competition price is set equal to marginal cost. Since there are many buyers and sellers so firms are price takers and minimize the average total cost to increase the economic profit.


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