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# Under perfect competition, the long-run equilibrium requires?

EconomicsJAMB UTME 1985

### Question

Under perfect competition, the long-run equilibrium requires?

### Options

A)
MR = MC
B)
MR = AC = AR
C)
MR > MC
D)
MR = MC = AR = AC E)
AR = AC

### Explanation:

This question is about perfect competition and the long-run equilibrium. In a perfectly competitive market, there are many buyers and sellers, and no one has the power to influence the price of the product. The long-run is a period of time in which all factors of production can be varied. At this point, the firm is said to be in equilibrium.

The question is asking which condition must be met to achieve long-run equilibrium under perfect competition. The correct answer is option D, which states that the long-run equilibrium requires that the marginal revenue (MR) equals the marginal cost (MC) and also equals the average revenue (AR) and the average cost (AC).

To explain this further, marginal revenue is the additional revenue that a firm receives when it sells one more unit of output. Marginal cost is the additional cost that a firm incurs when it produces one more unit of output. Average revenue is the total revenue divided by the quantity of output sold. Average cost is the total cost divided by the quantity of output produced.

In long-run equilibrium, a firm is earning only a normal profit, which means that its total revenue is equal to its total costs, including a normal rate of return on capital. The condition that MR=MC ensures that the firm is producing the right amount of output to maximize its profit, while the condition that AR=AC ensures that the firm is earning only a normal profit.

In summary, under perfect competition, the long-run equilibrium requires that MR=MC=AR=AC. This ensures that the firm is producing the right amount of output to maximize its profit while earning only a normal profit.