In long-run equilibrium, output is expanded to the minimum long-run average total cost by:
A) perfectly competitive firms but not by monopolistically competitive firms.
B) monopolistically competitive firms but not by perfectly competitive firms.
C) both monopolistically competitive firms and perfectly competitive firms.
D) neither perfectly competitive firms nor monopolistically competitive firms.

Question

Quizplus · Accepted Answer

In long-run equilibrium, perfectly competitive firms expand output to the point where price equals the minimum long-run average total cost, ensuring efficiency and optimal resource allocation. Monopolistically competitive firms, however, face downward-sloping demand curves and typically do not produce at minimum long-run average total cost, leading to excess capacity.

In Long-Run Equilibrium, Output Is Expanded to the Minimum Long-Run