Figure 11-1

The Red Cross is virtually the only operator of blood banks in the United States. In Figure 11-1 are the demand and cost curves facing the Red Cross blood bank. If the Red Cross were to set price and quantity at the level that it would obtain in the long run in a competitive industry, how much blood would it sell?
A)OA
B)OB
C)OD
D)OC

Question

Figure 11-1

The Red Cross is virtually the only operator of blood banks in the United States. In Figure 11-1 are the demand and cost curves facing the Red Cross blood bank. If the Red Cross were to set price and quantity at the level that it would obtain in the long run in a competitive industry, how much blood would it sell?
A)OA 
B)OB 
C)OD 
D)OC

Quizplus · Accepted Answer

In a competitive industry, firms will produce where marginal cost (MC) equals price (P), which is at point C in this graph. At this point, the Red Cross would produce and sell 1,000 units of blood at a price of $100 per unit. This is because the MC curve intersects the demand curve at point C, and any point to the left of this would result in profits lower than what a competitive firm would earn in the long run. Thus, the best choice is D) OC.

Figure 11-1 The Red Cross Is Virtually the Only Operator of Blood