Final answer:
In a competitive market with 1,000 identical firms, the long-run equilibrium price will be equal to the minimum of each firm's average total cost. Firms in a perfectly competitive market are price takers and aim to minimize costs to maximize profit.
Step-by-step explanation:
In a competitive market with 1,000 identical firms, the long-run equilibrium price will be equal to the minimum of each firm's average total cost. This is because in a perfectly competitive market, firms are price takers and have no control over the price of their products.
Each firm aims to minimize its average total cost in order to maximize its profits. If the market price is higher than the average total cost, firms will enter the market and increase competition. This will drive down the price until it reaches the minimum average total cost, where firms can still earn normal profits.
On the other hand, if the market price is lower than the average total cost, firms will exit the market, reducing competition. This will drive up the price until it reaches the minimum average total cost again.