When all firms and potential firms in a market have the same cost curves, the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms
A)earning small but positive economic profits.
B)facing the prospect of future losses.
C)operating at the efficient scale.
D)that work together to raise market prices.

Question

Quizplus · Accepted Answer

When all firms and potential firms in a market have the same cost curves, the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms operating at the efficient scale. At the efficient scale, firms are producing at the lowest possible cost, and there is no incentive for new firms to enter the market, as they would not be able to produce at a lower cost than existing firms. This results in zero economic profit in the long run.

When All Firms and Potential Firms in a Market Have