Suppose that the agricultural sector is perfectly competitive. Also suppose that all current producers and any potential producer that might enter the sector all have identical cost curves, with minimum ATC = $1.50 per pound of Roma tomatoes. If the market equilibrium price of Roma tomatoes is currently $1.99 per pound: 1. What would you expect the equilibrium price to be in the long run? Graph and explain your answer. 2. Distinguish between productive efficiency and allocative efficiency in your previous answer.

Suppose that the agricultural sector is perfectly competitive. Also suppose that all current producers and any potential producer that might enter the sector all have identical cost curves, with minimum ATC = $1.50 per pound of Roma tomatoes. If the market equilibrium price of Roma tomatoes is currently $1.99 per pound: 1. What would you expect the equilibrium price to be in the long run? Graph and explain your answer. 2. Distinguish between productive efficiency and allocative efficiency in your previous answer.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.6P

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