Use the following to answer question:
-(Table: Cherry Farm)Use Table: Cherry Farm.Suppose there are 100 farms in this industry with identical cost curves,as shown in the table.At what price will the industry be in long-run equilibrium?

Question

Use the following to answer question: 
-(Table: Cherry Farm)Use Table: Cherry Farm.Suppose there are 100 farms in this industry with identical cost curves,as shown in the table.At what price will the industry be in long-run equilibrium?

Quizplus · Accepted Answer

In long-run equilibrium, firms in a perfectly competitive market will produce at the point where price equals the minimum of the long-run average cost (LRAC). Without the specific table details, we typically assume that the LRAC is minimized where firms make zero economic profit, ensuring no new firms enter or exit the industry. Given the choices, $4 is the most likely answer as it suggests a scenario where firms cover all their costs, including the opportunity cost, without making extra profit that would attract new firms into the industry.

Use the Following to Answer Question