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 industry output in long-run competitive equilibrium is 96,000,the long-run marginal cost (LMC)of producing the 96,000th 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 industry output in long-run competitive equilibrium is 96,000,the long-run marginal cost (LMC)of producing the 96,000th unit of good W is $_________.

Quizplus · Accepted Answer

In the long-run competitive equilibrium, the industry output is 96,000 units and there are 120 firms in the industry. Each firm faces an identical long-run average cost curve given by LAC'', which intersects the demand curve at a price of $18. The long-run marginal cost (LMC) for the 96,000th unit can be found by looking at the point where the LAC'' curve intersects the marginal cost curve, which is at a cost of $16. Therefore, the answer is C.

Good W Is Produced in a Competitive Industry with Increasing