Suppose that for each firm in the competitive market for potatoes,long-run average cost is minimized at $0.20 per pound when 500 pounds are grown.The demand for potatoes is Q = 10,000/p.If the long-run supply curve is horizontal,then how many firms will this industry sustain in the long run?

Question

Quizplus · Accepted Answer

In a competitive market, all firms earn zero economic profit in the long run. Therefore, the long-run price must equal the long-run average cost for each firm. 
Given that the long-run average cost is minimized at $0.20 per pound when 500 pounds are grown, the marginal cost of producing an additional pound of potatoes is also $0.20. 
The long-run supply curve is horizontal at this price, indicating that any number of firms can enter or exit the market without affecting the price. 
The market demand for potatoes is Q = 10,000/p. 
At the long-run price of $0.20 per pound, the market demand is:
Q = 10,000/0.20 = 50,000 pounds. 
Therefore, the industry can sustain 50,000/500 = 100 firms in the long run, each producing 500 pounds of potatoes at a price of $0.20 per pound.

Suppose That for Each Firm in the Competitive Market for Potatoes,long-Run