Suppose that the marginal cost of producing cottonseed meal is $170 per ton. If

Question

Suppose that the marginal cost of producing cottonseed meal is $170 per ton. If the cottonseec oil industry is perfectly competitive and in long run equilibrium, then the average total cost of producing cottonseed oil: is less than $170 per ton. is equal to $170 per ton. is greater than $170 per ton. cannot be determined. A significant difference between monopoly and perfect competition is that: free entry and exit is possible in a monopolized industry but impossible in a competitive industry. competitive firms control market supply, but monopolies do not. the monopolist's demand curve is the industry demand curve, while the competitive firm's demand curve is perfectly elastic. profits are driven to zero in a monopolized industry, but may be positive in a competitive industry.

Explanation / Answer

6.) A.) It is less that $170 a ton because the market is in long run equilibrium. For that firm to stay in the market, the cost must be less than $170 a ton, or that firm would have shut down.

7.) C.) In a perfectly competitive market, if a firm charges more than the market price for the good, nobody will buy it, and will instead buy a competitors good. Therefore, in a perfectly competitive market, the demand curve is perfectly elastic. In a monopoly, the monopolist can charge wahtever price the firm wants, as there is no competitor to buy the good from instead.

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