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    Question

    Under perfect competition, the long-run equilibrium of

    the firm is established at
    A minimum point of LAC Correct Answer Incorrect Answer
    B highest point of LAC Correct Answer Incorrect Answer
    C minimum point of SAC Correct Answer Incorrect Answer
    D highest point of SAC Correct Answer Incorrect Answer

    Solution

    “In the long-run, firms are in equilibrium when they have adjusted their plant so as to produce at the minimum point of their long-run AC curve, which is tangent (at this point) to the demand (AR) curve defined by the market price” so that they earn normal profits.

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