Suppose that (1)LRATC is minimized at $60 when 30,000 units are being produced,(2)the quantity demanded at a price of $60 is 150,000 units,and (3)there are currently 10 firms producing in the market.Then,
A)we should expect competition to result in a decrease in the number of firms
B)we should expect a natural monopoly to emerge
C)we should expect some existing firms to divide up into smaller firms.
D)the LRATC curve will shift upward in the long run
E)the LRATC curve will shift downward in the long run.

Question

Quizplus · Accepted Answer

The current market demand of 150,000 units at a price of $60 is much higher than the efficient scale of production for each firm (30,000 units). This suggests that fewer firms are needed to meet the market demand efficiently, leading to a decrease in the number of firms due to competition.

Suppose That (1)LRATC Is Minimized at $60 When 30,000 Units