In the long-run equilibrium of a market with free entry and exit, if all firms have the same cost structure, then
A)marginal cost exceeds average total cost.
B)the price of the good exceeds average total cost.
C)average total cost exceeds the price of the good.
D)firms are operating at their efficient scale.

Question

Quizplus · Accepted Answer

In the long-run equilibrium of a perfectly competitive market with free entry and exit, firms produce at the point where price equals marginal cost and average total cost, meaning they operate at their efficient scale, where average total cost is minimized.

In the Long-Run Equilibrium of a Market with Free Entry