Asked by Francine Fiscor on Jun 16, 2024
Verified
Refer to Figure 8.7.3 above. As the competitive industry, not just the firm in question, moves toward long-run equilibrium, how much profit will the firm earn?
A) $0
B) $306
C) $312
D) $1000.
E) $1024
Competitive Industry
A Competitive Industry is characterized by many producers and consumers with the products being largely similar, leading to minimal ability for firms to set prices higher than market rates.
Long-Run Equilibrium
is an economic condition where all inputs and outputs in a market are fully adjusted to any changes, leading to a stable state of operations over time.
Profit
The financial gain obtained when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.
- Understand and explain the concept of long-run equilibrium in a competitive market and how firms earn zero economic profit in this state.
Verified Answer
CG
Cindy GuzmanJun 16, 2024
Final Answer :
A
Explanation :
In long-run equilibrium, the price will be equal to the minimum average total cost (MATC) and the firm will earn zero economic profit. At MATC of $12, the price is $12, which means the firm will earn zero profit. Therefore, the answer is A) $0.
Learning Objectives
- Understand and explain the concept of long-run equilibrium in a competitive market and how firms earn zero economic profit in this state.