CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

Which of the following will be true for a competitive firm in long-run equilibrium?

I. P = MC
II. ATC = MC
III. P = ATC
A. I only
B. I and III
C. I, II and III
Explanation: The firm's profit maximizing condition states that the firm operates where P = MC. This implies several things: in order to earn zero profits, the firm's ATC must equal price. Therefore, since P = MC and P = ATC, by induction, MC = ATC.

User Contributed Comments 1

User Comment
MylesGrenier Hope no one picked B
You need to log in first to add your comment.