The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curves for a representative firm in that market. Assume that all firms in this market have identical cost curves. The long-run market equilibrium quantity in this industry is:
A)300.
B)500.
C)700.
D)more than 700.

Question

The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curves for a representative firm in that market. Assume that all firms in this market have identical cost curves.  The long-run market equilibrium quantity in this industry is:
A)300. 
B)500. 
C)700. 
D)more than 700.

Quizplus · Accepted Answer

The long-run equilibrium price occurs at the minimum of the average total cost curve, which in this case is $5. When price is $5, the quantity demanded is 500, so in the long run the market supply curve will intersect the demand curve at this quantity.

The Figure Below Depicts the Short-Run Market Equilibrium in a Perfectly