In the Long-Run Equilibrium of a Competitive Market, the Number

question 175

Multiple Choice

In the long-run equilibrium of a competitive market, the number of firms in the market adjusts until the market demand is satisfied at a price equal to the minimum of

• A)average fixed cost for the marginal firm.
• B)marginal cost of the marginal firm.
• C)average total cost of the marginal firm.
• D)average variable cost of the marginal firm.

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Definitions:

Average Total Cost

The total cost of production (fixed and variable costs combined) divided by the quantity of output produced.

Total Variable Cost

The total of all costs that vary with the level of output, including costs such as materials and labor.

Average Variable Cost

The variable cost per unit of output, calculated by dividing total variable costs by the quantity of output produced.

Marginal Cost Curve

A visual chart demonstrating the change in cost for manufacturing an additional unit of a product as production levels rise.