Asksia AI LOGO

Sia

Question
Macroeconomics
Posted 3 months ago

What is true about the quantity of maps this firm produces in the long run?

Choose 1 answer:
(A) Marginal benefit equals marginal cost and the average total cost is minimized.
(B) Marginal benefit equals marginal cost and marginal cost is greater than the average total cost.
(c) Marginal benefit exceeds the marginal cost and the average total cost is minimized.
(D) Marginal benefit exceeds marginal cost and marginal cost equals average total cost.
(E) The quantity is allocatively efficient but not productively efficient.
Sign in to unlock the answer
Answer from Sia
Posted 3 months ago
Solution
a
Long-Run Equilibrium in Perfect Competition: In the long run, a perfectly competitive firm will produce at a quantity where marginal cost (MC) equals marginal benefit (MB), which is also the price (P), and where average total cost (ATC) is minimized. This is because firms can enter and exit the market freely, and profits are driven to zero in the long run, leading to the condition P = MC = ATC
b
Elimination of Incorrect Options: Based on the long-run equilibrium condition for a perfectly competitive firm, we can eliminate options (C), (D), and (E) because they do not satisfy the condition where MC = MB and ATC is minimized. Option (B) is also incorrect because it suggests MC > ATC, which would imply the firm is making a profit, not possible in the long run in perfect competition
Answer
(A) 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 will produce the quantity where marginal benefit equals marginal cost, and where average total cost is minimized, reflecting the point of normal profit.

Not the question you are looking for? Ask here!

Enter question by text

Enter question by image

Upgrade to Asksia Pro

Join a AskSia's Pro Plan, and get 24/7 AI tutoring for your reviews, assignments, quizzes and exam preps.

Unlimited chat query usages
Strong algorithms that better know you
Early access to new release features
Study Other Question