This is a Multiple Choice question Itis worth 1 pointYou hav

This is a Multiple Choice question/ Itis worth 1 point/You have 1 of 1 attempts remaining/There is no attempt penalty 11 Question (1 point) 1st attempt Lenora and Uma own a dog-grooming business in upstate New York, called Pawkeepsie Groomers. There are many buyers and many sellers in the dog-grooming service market. Pawkeepsie Groomers experiences normal cost curves, with the marginal cost (MC) curve crossing average variable cost (AVC) at $14 and average total cost (ATC) at $22 Pawkeepsie Groomers long-run supply curve would be the: Choose one: A. marginal revenue (MR) curve above $22. B. marginal cost (MC) curve above $14. C. C. marginal cost (MC) curve above $22. D. marginal revenue (MR) curve above $14. E. average variable cost (AVC) curve above $14. SUBMIT ANSWER OF S0 QUESTIONS COMPLETED K11/50

Solution

The correct choice is E

Explanation : - The long run supply curve of a perfectly competitive firm is identical to the long run average cost curve. This is because in the long run economic profit is zero . The price the industry charges cannot exceed the long run average cost of supplying that quantity because any excess of price over long run average cost would constitute a profit opportunity that would attract new firms and drive prices down to average cost. The price cannot go below long run average cost because at this price firms would refuse to supply and output would fall driving the prices up until it equaled average cost. Thus the long run supply curve is the industry\'s average cost curve.