Table 14-3
The market for Whizzly Jigs consists of many identical firms, each with the cost structure below.Suppose the current market price is $2.
-Refer to table 14-3.With free entry and exit, what will be the long run price of Whizzly Jigs?

Question

Table 14-3
The market for Whizzly Jigs consists of many identical firms, each with the cost structure below.Suppose the current market price is $2.  
-Refer to table 14-3.With free entry and exit, what will be the long run price of Whizzly Jigs?

Quizplus · Accepted Answer

In the long run, firms in a competitive market will enter and exit until economic profits are zero, which occurs where price equals the minimum of average total cost (ATC). Without the specific table, the general principle is that the long-run equilibrium price in a competitive market will be at the point where the price equals the minimum ATC. Assuming the minimum ATC is $4.00, that would be the long-run price.

Table 14-3 The Market for Whizzly Jigs Consists of Many Identical Firms