Question

A firm under perfect competition is in the long-run equilibrium at the output where _________.

• A. MC=MR=P
• B. P = MC = minimum LAC
• C. AC = AR = P
• D. MR = MC = AC = AR

Answer 1

Answer: (B)

P = MC = minimum LAC

For a firm to be in long-run equilibrium, it must first satisfy the profit maximization condition which is LMC = MR, and also that the LMC curve cuts the MR curve from below and secondly P(AR) = AC. Furthermore, under perfect competition, AR = MR. Thus, we have the condition LMC = MR = AR = LAC (min)