The typical firm in Figure 10-7(a) produces output level q1, because at this level of output price is equal to short-run marginal cost (SMC). In addition, with a market price of P1, output level q1 is also a long-run equilibrium position for the firm. The firm is maximizing profits because price is equal to long-run marginal cost (MC). Figure 10-7(a) also shows a second long-run equilibrium property: Price is a equal to long-run average total costs (AC). Consequently, economic profits are zero and there is no incentive for firms either to enter or to leave market.