Question

Will a profit-maximising firm in a competitive market produce a positive level of output in the long run if the market price is less than the minimum of AC? Give an explanation.

Answer 1

Answer:

No, it is not possible for a firm to produce positive level of output in long run if the market price is less than average cost because in long then there is free entry and exit of firms which leads to generate normal profit as their earning so if any firm is making loss in long run it will exit and stop production.