Question

In the long-run equilibrium of a competitive market, the number of firms in the market adjusts until the market demand is satisfied at a price equal to the minimum of A. marginal cost of the marginal firm. B. average total cost of the marginal firm. C. average fixed cost for the marginal firm. D. average variable cost of the marginal firm.

Answer 1

Answer: Option(b) is correct.

Step-by-step explanation:

Correct option: Average total cost of the marginal firm.

In the long run, when new firms enter into market then the price of the product falls because of the competition and supply of output increases which also increases the cost of production.

So, firms in this market adjust untill the price equal to the minimum of average total cost. After this point it incurred losses, thus, firms left the market.