In a long-run perfectly competitive equilibrium, $P = A C , \text { where } P$ is market price and AC is the average cost of a firm.

Question

Quizplus · Accepted Answer

In perfect competition, firms earn normal profits in the long run, which means that the market price is equal to the average cost of production for each firm. Thus, P = AC in long-run equilibrium. In a long-run perfectly competitive equilibrium, firms will produce at the lowest point on their average cost curve (AC), which means that $P = AC$ at that point. Market price (P) will be equal to the average cost (AC) of the representative firm in the market. Therefore, the statement is true.

In a Long-Run Perfectly Competitive Equilibrium P=AC, where PP = A C , \text { where } PP=AC, where P

In a Long-Run Perfectly Competitive Equilibrium $P = A C , \text { where } P$