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JAMB Economics 1991 Question 19

Question 19

Market Structures

In a perfectly competitive market, the firm is in long-run equilibrium at the output where

  1. A.marginal cost is minimum
  2. B.average cost is minimum
  3. C.total revenue is maximum
  4. D.marginal revenue is maximum
Show the answer and explanation

Answer: B (average cost is minimum)

Explanation

In the long run free entry removes supernormal profit, so price equals the minimum of average cost.