average cost, then all of the firms competing in an industry should be the same size. However, if the LRAC has a

flat segment at the bottom, so that a firm can produce a range of different quantities at the lowest average cost,

the firms competing in the industry will display a range of sizes. The market demand in conjunction with the

long-run average cost curve determines how many firms will exist in a given industry.

If the quantity demanded in the market of a certain product is much greater than the quantity found at the

bottom of the long-run average cost curve, where the cost of production is lowest, the market will have many

firms competing. If the quantity demanded in the market is less than the quantity at the bottom of the LRAC,

there will likely be only one firm.

Self-Check Questions

1. A firm had sales revenue of $1 million last year. It spent $600,000 on labor, $150,000 on capital and

$200,000 on materials. What was the firm’s accounting profit?
{"file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "batch_upload": true, "file_size_mb": 26.99, "file_name": "Microeconomics3e.pdf", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "upload_timestamp": "2026-02-07T15:37:44.339247", "producer": "Prince 14.2 (www.princexml.com)", "moddate": "2022-12-07T14:23:05-06:00", "creationdate": "2022-12-07T14:15:44-06:00", "title": "Principles of Microeconomics 3e", "creator": "PDFMiner", "total_pages": 597, "uploaded_via": "batch_uploader", "file_type": ".pdf"}