A perfectly competitive wheat farmer in a constant-cost industry produces 1,000 bushels of wheat at a total cost of $50,000. The prevailing market price is $48. What will happen to the market price of wheat in the long run?
A) The price remains constant at $48.
B) The price rises above $48.
C) The price falls below $48.
D) There is insufficient information to answer the question.
B
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When banks hold excess reserves, the size of the money multiplier
A) is less than the simple deposit multiplier would suggest. B) is greater than the simple deposit multiplier would suggest. C) is equal to the size of the simple deposit multiplier. D) becomes infinite.
Suppose that each worker must use only one shovel to dig a trench, and shovels are useless by themselves. In the long run, an increase in the price of shovels will result in
A) fewer shovels being purchased to produce the same number of trenches. B) more workers being hired to produce the same number of trenches. C) the firm wishing to produce more trenches. D) no change in the firm's input mix.