Figure 7-13

-Figure 7-13 shows the average total cost curves of four firms that produce milk.Some of the dairies are more productive.AR = P is the long-run price of milk.How many of these dairies will remain in the industry in the long run?
A)all of them
B)only 2
C)only 3
D)cannot determine with information given

Question

Figure 7-13
 
-Figure 7-13 shows the average total cost curves of four firms that produce milk.Some of the dairies are more productive.AR = P is the long-run price of milk.How many of these dairies will remain in the industry in the long run?
A)all of them 
B)only 2 
C)only 3 
D)cannot determine with information given

Quizplus · Accepted Answer

In the long run, only firms that can produce at or below the market price (AR = P) will remain in the industry. Therefore, only the firms whose average total cost curves are at or below the long-run price of milk will survive.

Figure 7-13 -Figure 7-13 Shows the Average Total Cost Curves of Four