{"id":240147,"date":"2025-07-03T07:37:07","date_gmt":"2025-07-03T07:37:07","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=240147"},"modified":"2025-07-03T07:37:09","modified_gmt":"2025-07-03T07:37:09","slug":"consider-a-perfectly-competitive-firm-whose-minimum-average-total-cost-is80","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/07\/03\/consider-a-perfectly-competitive-firm-whose-minimum-average-total-cost-is80\/","title":{"rendered":"Consider a perfectly competitive firm whose minimum average total cost is80,"},"content":{"rendered":"\n

Consider a perfectly competitive firm whose minimum average total cost is
80, then in the long run a. market supply will fall b. new, more-efficient firms will be attracted into the industry c. all the firms currently operating will increase output d. total market output will rise e. the firm’s average revenue will fall<\/p>\n\n\n\n

The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n

The correct answer is b. new, more-efficient firms will be attracted into the industry<\/strong>.<\/p>\n\n\n\n

Explanation:<\/h3>\n\n\n\n

In a perfectly competitive market, firms will enter or exit the market in the long run based on the profitability of existing firms. The key concept here is that, in the long run, firms will operate at the point where Price = Marginal Cost (MC) = Minimum Average Total Cost (ATC)<\/strong>.<\/p>\n\n\n\n

If the minimum ATC is given as 80, this suggests that the firm’s efficient scale<\/strong>\u2014the level of output at which the firm minimizes its costs\u2014is where it is earning just enough to cover its costs in the long run. If the firm’s Price<\/strong> in the market is equal to 80 (the minimum ATC), the firm is making zero economic profit. This is typical in a perfectly competitive market where firms only make normal profits (zero economic profit) in the long run.<\/p>\n\n\n\n

Now, let\u2019s consider the effects on the market and firm behavior:<\/p>\n\n\n\n

    \n
  1. Attracting New Firms<\/strong>: If some firms in the market are earning profits (i.e., price > ATC), new, more-efficient firms will be attracted to the industry, hoping to achieve the same level of profitability by operating at the minimum ATC, which is 80. These new firms bring with them improved efficiencies, which may drive down costs or increase supply in the market.<\/li>\n\n\n\n
  2. Increased Supply<\/strong>: The entrance of new, more-efficient firms increases market supply, which, under perfect competition, will eventually lead to lower market prices. This process continues until the market price is driven down to the point where firms are just covering their minimum ATC, meaning they are making no economic profit.<\/li>\n\n\n\n
  3. Market Equilibrium<\/strong>: In the long run, all firms in the market will operate at their minimum ATC, which in this case is 80. The industry will reach a new equilibrium, where the market supply is sufficient to meet market demand, and firms produce at their most efficient output level.<\/li>\n<\/ol>\n\n\n\n

    Thus, the correct answer is that new, more-efficient firms will be attracted into the industry<\/strong> as long as there are opportunities for profit.<\/p>\n\n\n\n

    \"\"<\/figure>\n","protected":false},"excerpt":{"rendered":"

    Consider a perfectly competitive firm whose minimum average total cost is80, then in the long run a. market supply will fall b. new, more-efficient firms will be attracted into the industry c. all the firms currently operating will increase output d. total market output will rise e. the firm’s average revenue will fall The Correct […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-240147","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/240147","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=240147"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/240147\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=240147"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=240147"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=240147"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}