Question on: JAMB Economics - 2005
In the long run, the equilibrium point of a monoplistic firm is a point where the
A
marginal cost curve is tangential to the average fixed cost curve
B
demand curve is tangential to the average variable cost curve
C
supply cuvre is tangential to the marginal cost curve
D
demand curv is tangential to the average cost curve
Ask EduPadi AI for a detailed answer
Correct Option: B
In the long run, a monopolistic firm's equilibrium occurs where the demand curve is tangent to the average cost curve. This is because in the long run, firms can adjust their plant size. They will operate at the point where they achieve the lowest possible average cost given the market demand. The tangency point signifies that the firm is producing at an output level where its average cost is minimized, but still earning only normal profit (economic profit of zero).
Add your answer
Please share this, thanks!
No responses