See Hint Why don\'t firms in a competitive market have excess capacity in the lo

Question

See Hint Why don't firms in a competitive market have excess capacity in the long run? Choose one: - A For the types of goods produced in competitive markets, it is difficult to store any goods that cannot be sold immediately, so it does not make sense to invest in capital that provides the potential to produce more than the market can consume. B. A competitive firm always produces as much as it can, because it knows that other firms will also produce at their maximum capacity competitive markets always earn zero economic profit due to free entry and exit. marginal cost equals average total cost. o C. Excess capacity exis ts only when firms are making economic profits, and firms in D. For competitive firms, marginal revenue equals marginal cost at the point where SUBMIT ANSWER tart Smartworks-G Accounting/12BRA. .Daly Log of Empl.. Apri Gas Tracker . 5:48 PM Smosth5

Explanation / Answer

Answer D. For competitive firms, Marginnal revenue equals marginal cost at the point where marginal cost equals average total cost.

Explanation:

The competitive firms produces at a level where marginal revenue equal to marginal cost and the quantity whctc can be sold in the market easily by them. However, if they produce beyond the requirement, average total cost will rise and marginal revenue (due to sales remains same) will be lower than average total cost, resulting in the loss to the firm.

hence. the firm will make upto the point where marginal revenue equals to marginal cost and sell all the quantity produced.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.