Problem 3 In the long run only a(n) operat... [FREE SOLUTION]

Chapter 24: Problem 3

In the long run only a(n) operates at the minimum point of its ATC curve.

Short Answer

Expert verified

In the long run, only a \(perfectly\ competitive\ firm\) operates at the minimum point of its ATC curve.

Step by step solution

Identify the types of firms

There are two main types of firms: perfectly competitive firms and imperfectly competitive firms (which include monopolies, oligopolies, and monopolistic competition). We need to determine which of these types of firms operates at the minimum point of its ATC curve in the long run.

Understand perfectly competitive firms

In a perfectly competitive market, firms are price takers and cannot influence the market price. In the long run, perfectly competitive firms achieve economic equilibrium, where they earn zero economic profit. They do this by producing at the minimum point of their ATC curve, which ensures the most efficient use of resources.

Understand imperfectly competitive firms

Imperfectly competitive firms, on the other hand, have some control over their prices and can achieve economic profits in the long run. However, these firms do not necessarily operate at the minimum point of their ATC curve, as they prioritize maximizing profits over minimizing costs.

Determine which type of firm operates at the minimum point of its ATC curve in the long run

As we previously mentioned, perfectly competitive firms achieve economic equilibrium by producing at the minimum point of their ATC curve in the long run. Therefore, the correct answer is a perfectly competitive firm. So, in the long run only a perfectly competitive firm operates at the minimum point of its ATC curve.