Suppose that the firms in the perfectly competitive oat industry currently are receiving a price of $2 per bushel for their product. The minimum possible average total cost of producing oats in the long run is $1 per bushel. It follows that:

Question

Quizplus · Accepted Answer

Since the price is above the minimum average total cost, firms are earning economic profits, which will attract new firms to enter the industry, driving the price down in the long run.

Suppose That the Firms in the Perfectly Competitive Oat Industry