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.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Firms In Competitive Markets

Section: Chapter Questions

Problem 10PA

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