Under perfect competition a firm will be in stable equilibrium in the long run if the price is equal to

April 15, 2024 by rawan239

that they cannot influence the market price of their product. As a result, the firm’s marginal revenue curve is equal to the market demand curve. The firm will be in stable equilibrium in the long run if the price is equal to marginal cost. This is because the firm will be maximizing profits when marginal revenue is equal to marginal cost.

Option B, marginal cost, is the additional cost incurred by producing one more unit of output. Option C, average fixed cost, is the total fixed cost divided by the number of units produced. Option D, average variable cost, is the total variable cost divided by the number of units produced. These three costs are not relevant to the question of whether a firm is in stable equilibrium in the long run.