In the long run,all of the firms in a perfectly competitive industry will:

A) produce at an output level at which average total cost equals marginal cost.
B) earn an economic profit greater than zero.
C) exit the industry if price is greater than average total cost.
D) produce an output level at which price is greater than average total cost.

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Marie Claire · Accepted Answer

Final Answer : A, Explanation :  In the long run, firms in a perfectly competitive industry will produce at the output level at which average total cost equals marginal cost because of the free entry and exit of firms in the industry. This means that firms cannot earn an economic profit greater than zero in the long run. If price is greater than average total cost, new firms will enter the industry, increasing supply and driving down prices until they are equal to average total cost. If price is less than average total cost, firms will exit the industry, decreasing supply and driving up prices until they are equal to average total cost.

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