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:

Decreasing Average Total Costs

A situation in which the average total cost of production decreases as the output increases, indicative of economies of scale.

Natural Monopoly

A market condition where a single supplier is most efficient in producing the good due to the high fixed or start-up costs associated with the industry.

Entire Range

The complete spectrum or scope of something, from one end to the other, without any exclusions.

Public Interest Theory

A theory suggesting that government regulation is driven by the need to protect the public from market failures and ensure the well-being of society.