If a Perfectly Competitive Industry Is in Long-Run Equilibrium, Then

question 228

Multiple Choice

If a perfectly competitive industry is in long-run equilibrium, then

• A) price equals average cost.
• B) price is greater than average cost and equal to marginal cost.
• C) all firms earn the same accounting profits.
• D) marginal cost is less than average cost.

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Definitions:

Marginal Cost

The elevation in overall cost triggered by assembling an extra unit of a product or service.

Overallocated

The condition of having allocated or committed more resources to a project, task, or item than is available or necessary.

Least-Cost

A method or strategy that involves choosing the option that minimizes the total costs of achieving a particular objective.

Pure Competition

A market structure characterized by a large number of small firms, free entry and exit, and a product that is considered perfectly homogeneous, leading to firms being price takers.