Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. The long-run equilibrium price in this industry is:
A)$15.
B)$10.
C)$5.
D)$0.

Question

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive.  The long-run equilibrium price in this industry is:
A)$15. 
B)$10. 
C)$5. 
D)$0.

Quizplus · Accepted Answer

In a perfectly competitive market, the long-run equilibrium price is equal to the minimum average total cost of production. Since all firms have identical cost curves, this minimum cost is the same for all firms. Therefore, the price will settle at $10, which is the minimum cost point.

Assume That All Firms in This Industry Have Identical Cost