[amp_mcq option1=”Price does not at least cover average total cost” option2=”Price does not equal marginal cost” option3=”Economies of sale are being reaped” option4=”Price is greater than long run average cost” correct=”option1″]<\/p>\n
The correct answer is: A. Price does not at least cover average total cost.<\/p>\n
In the long run, all costs are variable, so firms will only produce if the price they receive is greater than or equal to their average total cost. If price is less than average total cost, then the firm is making a loss on each unit it produces. In the long run, firms will not continue to produce at a loss, so they will eventually leave the industry.<\/p>\n
Options B, C, and D are incorrect. Price equaling marginal cost is a condition for profit maximization, but it is not a necessary condition for firms to remain in the industry in the long run. Economies of scale are a type of cost advantage that can lead to lower average total costs, but they are not a guarantee that firms will remain in the industry in the long run. Price being greater than long run average cost is a condition for firms to make a profit, but it is not a necessary condition for firms to remain in the industry in the long run.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”Price does not at least cover average total cost” option2=”Price does not equal marginal cost” option3=”Economies of sale are being reaped” option4=”Price is greater than long run average cost” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-49851","post","type-post","status-publish","format-standard","hentry","category-economics","no-featured-image-padding"],"yoast_head":"\n