Question

A firm in a perfectly competitive industry faces the following long run total cost schedule:  

	Perfect	Competition
Quantity	2	4	6	8	10	12	14	16
Total Cost	50	100	140	160	240	360	600	750

Given this data, we would expect the long run price of the product to be about:  

A. None of the above

B. $15

C. $20

D. $22

E. $25

Answer 1

In the long run, under the perfect competition, he price is equal to the minimum of the average total cost and, in that case, the minimum average total cost is 20 which we can calculate by dividing 160 by 8, so the right answer is option C i.e. $20.