Homework Answers
In a perfectly competitive market, in the long run, all the firms earn zero economic profit. This is because firms enter or exit the market based on the profitability of the industry in the long-run which will always lead to a condition of zero-economic profit for all the firms in the market.
Economic Profit = 0
=> Revenue - Cost = 0
=> P * Q - LRAC * Q = 0
=> P = LRAC
We know that the profit-maximising condition of a firm is the quantity at which P = MC
Therefore, the point at which P = MC = LRAC occurs only at the minimum point on the LRAC curve
Ans: D. will equal the minimum LRAC
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