Suppose that the current equilibrium price of silver is $20 per ounce. If silver is produced under conditions of perfect competition and the industry is in long-run equilibrium, the average total cost of producing silver:
A) is less than $20 per ounce.
B) is $20 per ounce.
C) exceeds $20 per ounce.
D) is indeterminate.

Question

Quizplus · Accepted Answer

In long-run equilibrium under perfect competition, firms produce at the minimum point of their average total cost curve, which equals the market price. Therefore, the average total cost of producing silver is $20 per ounce.

Suppose That the Current Equilibrium Price of Silver Is $20