Suppose that for the individual firm in a competitive market, LRMC = 4Q - 20 and LRAC = 2Q - 20
+ 100/Q. If this is a constant cost industry, then the long- run supply curve will be:

Question

Quizplus · Accepted Answer

In a constant cost industry, the long-run supply curve is horizontal at the price where LRMC equals LRAC. Setting LRMC = LRAC, we get 4Q - 20 = 2Q - 20 + 100/Q, which simplifies to Q = 5. Substituting Q = 5 into either LRMC or LRAC gives P = 8.

Suppose That for the Individual Firm in a Competitive Market