When a Firm in a Price-Taker Industry Is in Long-Run

question 7

Multiple Choice

When a firm in a price-taker industry is in long-run equilibrium, the market price equals

• A) marginal cost but may be greater or less than average total cost.
• B) both average total cost and marginal cost.
• C) average total cost but may be greater or less than marginal cost.
• D) marginal revenue but may be greater or less than both average total cost and marginal cost.

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Definitions:

Moral Hazard

The situation where one party can take risks because they know that they will not bear the consequences of their actions, often seen in situations where individuals or institutions are protected by insurance or other safety nets.

Insurance

A contract represented by a policy in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.

Avoiding Insured Risk

Strategies or actions taken to minimize exposure to risks that are typically covered by insurance policies.