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

question 40

Multiple Choice

Suppose that for each firm in the competitive market for potatoes,long-run average cost is minimized at $0.20 per pound when 500 pounds are grown.If the long-run supply curve is horizontal,then

• A) some firms will enjoy long-run profits because they operate at minimum average cost.
• B) the long-run price will be $0.20 per pound.
• C) each consumer will purchase $100 worth of potatoes.
• D) the long-run price will be set just above $0.20 per pound.

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Definitions:

Third-degree Price Discrimination

A pricing strategy where a seller charges different prices to different groups of consumers for the same product, based on attributes like age, location, or income.

Profit Maximizing Prices

Prices set by firms to maximize their profits, determined by the intersection of marginal cost and marginal revenue.

Marginal Revenue Function

A mathematical representation that shows how marginal revenue changes as the quantity of output is changed.

Dinner Special

A unique or discounted meal offered by a restaurant, typically for a limited time or occasion, often to attract customers or showcase new dishes.