Question

How does a producer get equilibrium in Long Run Period?

Answer 1

In the long run, a producer achieves equilibrium when they earn normal profit and have no incentive to enter or exit the industry.

The conditions for long-run equilibrium under perfect competition are

• MR = MC (Marginal Revenue equals Marginal Cost).
• MC is rising at the point of intersection.
• Price = Minimum of Long-Run Average Cost (LAC).

At this point:

• Firms produce at the most efficient scale.
• There is no abnormal profit or loss.
• Resources are optimally allocated.