There are 500 identical firms in a competitive market.The firms do not use any resources that are available in limited quantities,and all of them have the following long-run cost structure:
The long-run supply curve for this market is

Question

There are 500 identical firms in a competitive market.The firms do not use any resources that are available in limited quantities,and all of them have the following long-run cost structure: 
The long-run supply curve for this market is

Quizplus · Accepted Answer

In a perfectly competitive market, each firm will produce where its marginal cost equals the market price in the long run. The firms in this market have a constant long-run cost curve of $5. When 500 of these firms are added together, the long-run supply curve will also be horizontal at a price of $5. Any price above $5 will result in excess supply, and any price below $5 will result in excess demand. Therefore, the correct answer is choice C.

There Are 500 Identical Firms in a Competitive Market