Good W is produced in a competitive industry with increasing costs of production.The figure below shows how a typical firm's long-run average cost curve shifts upward as industry output of good W expands.With 50 firms in the industry,each firm faces an identical long-run average cost curve given by LAC.With 80 firms in the industry,each firm faces an identical long-run average cost curve given by LAC'.And with 120 firms in the industry,each firm faces an identical long-run average cost curve given by LAC''. When there are 80 firms in the industry in long-run competitive equilibrium,total industry output is ____________ units of good W and the long-run marginal cost (LMC)of producing the last unit of good W is $_________.

Question

Good W is produced in a competitive industry with increasing costs of production.The figure below shows how a typical firm's long-run average cost curve shifts upward as industry output of good W expands.With 50 firms in the industry,each firm faces an identical long-run average cost curve given by LAC.With 80 firms in the industry,each firm faces an identical long-run average cost curve given by LAC'.And with 120 firms in the industry,each firm faces an identical long-run average cost curve given by LAC''.  When there are 80 firms in the industry in long-run competitive equilibrium,total industry output is ____________ units of good W and the long-run marginal cost (LMC)of producing the last unit of good W is $_________.

Quizplus · Accepted Answer

In long-run competitive equilibrium, each firm will produce where P=MC=LAC'. From the graph, we can see that at LAC'= $10, the corresponding output is 600 units of good W per firm. Therefore, with 80 firms in the industry, the total industry output will be 48,000 units of good W (80 x 600). Since the long-run marginal cost (LMC) is equal to the long-run average cost (LAC) at this level of output, the LMC will also be $10.

Good W Is Produced in a Competitive Industry with Increasing