When a purely competitive firm is in long-run equilibrium, price is equal to
A) marginal cost but may be greater or less than average cost.
B) minimum average cost and also to marginal cost.
C) minimum average cost but may be greater or less than marginal cost.
D) marginal revenue but may be greater or less than both average and marginal cost.

Question

Quizplus · Accepted Answer

In long-run equilibrium, all firms in a perfectly competitive industry produce at the minimum point of their average total cost curves. At this point, price is equal to both marginal cost and minimum average cost, making choice B the correct answer. Choices A, C, and D are incorrect because they suggest that price may differ from minimum average cost or marginal cost, which would not be the case in long-run equilibrium.

When a Purely Competitive Firm Is in Long-Run Equilibrium, Price