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

Question

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

Quizplus · Accepted Answer

In the short run, firms will produce at the quantity where MR=MC, which is where P=MC=$5 in this case. However, in the long run, firms can enter or exit the market freely. Since there are no resource constraints and all firms have the same cost structure, new firms will enter the market if the price is above $5 and existing firms will exit the market if the price is below $5. This means that in the long run, the market supply curve will be horizontal at a price of $5.

In the Short Run,there Are 500 Identical Firms in a Competitive