At the long-run equilibrium of a perfectly competitive industry, price is set so that it is greater than marginal cost.

Question

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At the long-run equilibrium of a perfectly competitive industry, price is set equal to marginal cost, not greater than marginal cost. This is because, in perfect competition, firms have no market power and cannot charge higher prices than their competitors without losing market share. Thus, they produce where price equals marginal cost to maximize profits.

At the Long-Run Equilibrium of a Perfectly Competitive Industry, Price