Suppose that for each firm in the competitive market for potatoes,long-run average cost is minimized at 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?

Question

Quizplus · Accepted Answer

Since the long-run supply curve is horizontal, the market price will equal the minimum long-run average cost, which is 20¢ per pound.

To find the quantity demanded at this price, we can simply plug in 20¢ for P in the demand equation:

Q = 10,000/0.20 = 50,000

Therefore, consumers will spend:

Price x Quantity = 20¢ x 50,000 = $10,000

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