Which of the following is true about a perfectly competitive firm in the long run?

Choose 1 answer:
(A) It produces the quantity where marginal benefit exceeds marginal cost and marginal cost equals average total cost.
(B) It produces the quantity where marginal benefit equals marginal cost and marginal cost is greater than the average total cost.
(C) It produces the quantity where marginal benefit equals marginal cost and the average total cost is minimized.
(D) It produces the quantity where marginal benefit exceeds the marginal cost and the average total cost is minimized.
(E) It produces a quantity that is allocatively efficient but not productively efficient.

Question

Which of the following is true about a perfectly competitive firm in the long run?

Choose 1 answer:
(A) It produces the quantity where marginal benefit exceeds marginal cost and marginal cost equals average total cost.
(B) It produces the quantity where marginal benefit equals marginal cost and marginal cost is greater than the average total cost.
(C) It produces the quantity where marginal benefit equals marginal cost and the average total cost is minimized.
(D) It produces the quantity where marginal benefit exceeds the marginal cost and the average total cost is minimized.
(E) It produces a quantity that is allocatively efficient but not productively efficient.

Accepted Answer

∻Solution∻ ‖ a ⋮ Long-Run Equilibrium for Perfectly Competitive Firms: In the long run, perfectly competitive firms produce at the point where marginal cost (MC) equals marginal benefit (MB), which is also the price (P), and where MC intersects the minimum point of the average total cost (ATC) curve. This ensures both allocative and productive efficiency. ‖ ‖ b ⋮ Analysis of Answer Choices: - (A) Incorrect because MB should equal MC, not exceed it. - (B) Incorrect because in the long run, MC should equal ATC at its minimum, not be greater. - (C) Correct as it states MB equals MC and ATC is minimized. - (D) Incorrect because MB should equal MC, not exceed it, and while ATC is minimized, this is not the distinguishing factor. - (E) Incorrect because a perfectly competitive firm in the long run is both allocatively and productively efficient, not just allocatively. ‖ ∻Answer∻ ⚹ (C) It produces the quantity where marginal benefit equals marginal cost and the average total cost is minimized. ⚹ ∻Key Concept∻ ⚹ Long-Run Equilibrium in Perfect Competition ⚹ ∻Explanation∻ ⚹ In the long run, a perfectly competitive firm adjusts its production to the point where the price (which equals marginal benefit) is equal to marginal cost and where marginal cost intersects the average total cost curve at its lowest point, ensuring the firm is both allocatively and productively efficient. ⚹◊What is the relationship between marginal benefit, marginal cost, and average total cost for a perfectly competitive firm in the long run according to the information provided?⍭ Generate me a similar question◊

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