Question

If a market is perfectly competitive and is in long-run equilibrium, which of the following conditions does not hold?

A. Price is equal to the minimum long-run average cost of production.

B. Economic profit equals zero.

C. The value of the last unit of output produced is equal to the value of the resources used to produce it.

D. There is an incentive for additional firms to enter the market because existing firms are earning revenues in excess of the explicit costs of production.

Answer 1

If a market is perfectly competitive and is in long-run equilibrium, the following conditions does not hold : There is an incentive for additional firms to enter the market because existing firms are earning revenues in excess of the explicit costs of production.

Option D

Step-by-step explanation:

In short, companies involved in a highly competitive market achieve zero economic benefits in the long term. The long-term balance point of a fully competitive market takes place when the demand curve (price) reaches the marginal cost (MC) curve and the average cost (CC) minimum point curve.

Companies will continue to enter the industry until the price is as high as average costs, so that all companies only get normal profits. The loss manufacturing companies will leave the industry at Perfect Competition Long Run and new businesses will enter the market.