In a Perfectly Competitive Industry, There Are Two Types of Firms

question 145

Multiple Choice

In a perfectly competitive industry, there are two types of firms: low-cost producers and high-cost producers. The minimum average total cost of the high-cost producers is $150. The low-cost producers have a long-run total cost curve given by LTC = 150Q - 15Q² + 0.4Q³, where LMC = 150 - 30Q + 1.2Q². How much economic rent does the low-cost producer earn?

• A) $3,125
• B) $14,000
• C) $710
• D) $45,000

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Definitions:

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than its competitors.

Fewer Resources

Fewer resources refer to having a limited quantity of inputs or materials available for production or consumption compared to what is needed or demanded.

Specialization In Production

The process by which businesses or economies focus on producing a limited range of goods or services to gain greater efficiency and productivity.

International Trade

The exchange of goods and services between countries, allowing for specialization, more efficient production, and access to a broader range of products.