The long-run competitive equilibrium results in efficient allocation of capital.

Question

Quizplus · Accepted Answer

In a long-run competitive equilibrium, firms will produce at the lowest possible cost, resulting in an efficient allocation of capital. This is because they will only produce up to the point where price equals marginal cost, and any additional output would result in a loss. As a result, resources will be allocated to their most productive uses, maximizing total output and economic welfare.

The Long-Run Competitive Equilibrium Results in Efficient Allocation of Capital