If all firms in a market have the same LRATC curve,
A)only one of them can survive in the long run
B)the lowest possible long-run price is determined by LRATC at minimum efficient scale
C)the highest possible long-run price is determined by LRATC at minimum efficient scale
D)minimum efficient scale must be zero
E)there is no minimum efficient scale

Question

Quizplus · Accepted Answer

If all firms in a market have the same LRATC curve, the lowest possible long-run price is determined by LRATC at minimum efficient scale. This is because any firm operating at a scale smaller than the minimum efficient scale will have higher costs and eventually exit the market in the long run, leaving only the firms operating at minimum efficient scale or larger. Therefore, the price in the long run would have to be at least equal to the minimum efficient scale LRATC to cover the costs of the surviving firms.

If All Firms in a Market Have the Same LRATC