In a perfectly competitive market, the process of entry and exit will end when firms face
A)marginal revenue equal to long-run average total cost.
B)total revenue equal to average total cost.
C)average revenue greater than marginal cost.
D)accounting profits equal to zero.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms will enter if they see the opportunity to earn profits, and exit if they are making losses. This will continue until firms in the market are just earning normal profit or zero economic profit. At this point, firms will be producing at minimum long-run average total cost. Therefore, in the long run, firms will be producing at a point where their marginal revenue equals their long-run average total cost.

In a Perfectly Competitive Market, the Process of Entry and Exit