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 much will consumers spend,in total,on potatoes?
A) $0
B) $500
C) $10,000
D) $50,000

Question

Quizplus · Accepted Answer

Since the long-run supply curve is horizontal, firms can produce any amount of potatoes at a constant long-run average cost of $0.20 per pound. Therefore, the market price will be equal to the minimum long-run average cost, which is also $0.20 per pound.

Using the demand function Q = 10,000/p, we can solve for the equilibrium quantity:

Q = 10,000/p
500p = 10,000
p = $20

Therefore, consumers will spend $20 per pound on potatoes, and the total spending in the market will be:

$20/pound x 500 pounds = $10,000.

So, the correct answer is C) $10,000.

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