CA Foundation P4 · Chapter 4 · Question 6 of 15
In long-run equilibrium under perfect competition, each firm:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Earns only normal profit, with price equal to minimum long-run average cost
Explanation
Free entry and exit eliminate supernormal profits and losses in the long run. Equilibrium occurs where P = MR = LMC = minimum LAC, so firms produce at optimum scale and earn normal profit. Excess capacity is a feature of monopolistic competition.
More Price Determination in Different Markets MCQs
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