CA Foundation Exam > CA Foundation Questions > What are the conditions for the long run equi...
Start Learning for Free
What are the conditions for the long run equilibrium of the competitive firm?
- a)LMC = LAC = P
- b)SMC=SAC=LMC
- c)P=MR
- d)All of these
Correct answer is option 'A'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Verified Answer
What are the conditions for the long run equilibrium of the competitiv...
Condition for Long Run Equilibrium of a Firm. For a firm to achieve long run equilibrium, the marginal cost must be equal to the price and the long run average cost. That is, LMC = LAC = P. The firm adjusts the size of its plant to produce a level of output at which the LAC is minimum.
View all questions of this test
Most Upvoted Answer
What are the conditions for the long run equilibrium of the competitiv...
Conditions for long run equilibrium of the competitive firm:
1. LMC = LAC
In the long run, a competitive firm will produce at the point where long run marginal cost (LMC) is equal to long run average cost (LAC). This means that the firm is producing at the minimum efficient scale and there are no economies of scale left to be gained.
2. LMC = P
The competitive firm will sell its output at the market price (P) because it is a price taker. Therefore, the long run marginal cost (LMC) must be equal to the price in order for the firm to earn zero economic profit.
3. LAC = P
Since the firm is earning zero economic profit, the price must also be equal to the long run average cost (LAC). This indicates that the firm is producing at the minimum point on its average cost curve.
Therefore, the correct answer is option 'A' - LMC = LAC = P.
1. LMC = LAC
In the long run, a competitive firm will produce at the point where long run marginal cost (LMC) is equal to long run average cost (LAC). This means that the firm is producing at the minimum efficient scale and there are no economies of scale left to be gained.
2. LMC = P
The competitive firm will sell its output at the market price (P) because it is a price taker. Therefore, the long run marginal cost (LMC) must be equal to the price in order for the firm to earn zero economic profit.
3. LAC = P
Since the firm is earning zero economic profit, the price must also be equal to the long run average cost (LAC). This indicates that the firm is producing at the minimum point on its average cost curve.
Therefore, the correct answer is option 'A' - LMC = LAC = P.
Attention CA Foundation Students!
To make sure you are not studying endlessly, EduRev has designed CA Foundation study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in CA Foundation.
|
Explore Courses for CA Foundation exam
|
|
Similar CA Foundation Doubts
Top Courses for CA FoundationView all
What are the conditions for the long run equilibrium of the competitive firm?a)LMC = LAC = Pb)SMC=SAC=LMCc)P=MRd)All of theseCorrect answer is option 'A'. Can you explain this answer?
Question Description
What are the conditions for the long run equilibrium of the competitive firm?a)LMC = LAC = Pb)SMC=SAC=LMCc)P=MRd)All of theseCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about What are the conditions for the long run equilibrium of the competitive firm?a)LMC = LAC = Pb)SMC=SAC=LMCc)P=MRd)All of theseCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What are the conditions for the long run equilibrium of the competitive firm?a)LMC = LAC = Pb)SMC=SAC=LMCc)P=MRd)All of theseCorrect answer is option 'A'. Can you explain this answer?.
What are the conditions for the long run equilibrium of the competitive firm?a)LMC = LAC = Pb)SMC=SAC=LMCc)P=MRd)All of theseCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about What are the conditions for the long run equilibrium of the competitive firm?a)LMC = LAC = Pb)SMC=SAC=LMCc)P=MRd)All of theseCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What are the conditions for the long run equilibrium of the competitive firm?a)LMC = LAC = Pb)SMC=SAC=LMCc)P=MRd)All of theseCorrect answer is option 'A'. Can you explain this answer?.
Solutions for What are the conditions for the long run equilibrium of the competitive firm?a)LMC = LAC = Pb)SMC=SAC=LMCc)P=MRd)All of theseCorrect answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of What are the conditions for the long run equilibrium of the competitive firm?a)LMC = LAC = Pb)SMC=SAC=LMCc)P=MRd)All of theseCorrect answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
What are the conditions for the long run equilibrium of the competitive firm?a)LMC = LAC = Pb)SMC=SAC=LMCc)P=MRd)All of theseCorrect answer is option 'A'. Can you explain this answer?, a detailed solution for What are the conditions for the long run equilibrium of the competitive firm?a)LMC = LAC = Pb)SMC=SAC=LMCc)P=MRd)All of theseCorrect answer is option 'A'. Can you explain this answer? has been provided alongside types of What are the conditions for the long run equilibrium of the competitive firm?a)LMC = LAC = Pb)SMC=SAC=LMCc)P=MRd)All of theseCorrect answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice What are the conditions for the long run equilibrium of the competitive firm?a)LMC = LAC = Pb)SMC=SAC=LMCc)P=MRd)All of theseCorrect answer is option 'A'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
|
|
Explore Courses for CA Foundation exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup