passwella.
Menu

JAMB Economics 1991 Question 14

Question 14

Market Structures

Use the diagram (MC and AC curves with MR = AR lines at R and P). The long-run equilibrium price and quantity for the firm are respectively

Diagram for this question
  1. A.OP, OY
  2. B.OR, OZ
  3. C.OR, OX
  4. D.OQ, OZ
Show the answer and explanation

Answer: A (OP, OY)

Explanation

In the long run new firms push price down to the lowest point of AC, at V, where MC = MR = AR = P. Price is OP and output OY, and only normal profit is earned.