The minimum possible average total cost of producing rubbing alcohol in the long run is $2...
The minimum possible average total cost of producing rubbing alcohol in the long run is $2 per bottle. Suppose in the perfectly competitive rubbing alcohol industry firms are receiving a price of $4 per bottle for their product in the short run and there are constant returns to scale. Other things being equal, it follows that:
Homework Answers
Minimum ATC = $2
P= $4
Because P>min ATC . So, other things being equal , it follows that new firms would enter in the industry and price would start falling , price of rubbing alcohol will be $2 in the long run because perfectly competitive firm earn zero economic profit in the long run , therefore price would be equal to minimum average total cost.
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The minimum possible average total cost of producing rubbing
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