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JAMB Economics 1985 Question 14

Question 14

Market Structures

Under perfect competition, the long-run equilibrium requires

  1. A.MR = MC
  2. B.MR = AC = AR
  3. C.MR > MC
  4. D.MR = MC = AR = AC
  5. E.AR = AC.
Show the answer and explanation

Answer: D (MR = MC = AR = AC)

Explanation

In the long run the firm maximises profit (MR = MC) and earns only normal profit (AR = AC); since AR = MR, all four are equal.