In a long-run perfectly competitive equilibrium with heterogeneous firms, the market price __________ driven down to the bottom of each firm's average cost curve.
A) may not be
B) must be
C) will never be

Question

Quizplus · Accepted Answer

In a long-run perfectly competitive equilibrium, firms can have different cost structures due to heterogeneity. Therefore, the market price may not necessarily be driven down to the bottom of each firm's average cost curve, as it aligns with the lowest cost producers, allowing for differences in efficiency and costs among firms.

In a Long-Run Perfectly Competitive Equilibrium with Heterogeneous Firms, the Market