-Given the market demand and cost data in the above figure, the existence of two firms equal sized firms producing a total of 8 million cubic feet of natural gas means that the long-run average cost of producing natural gas is
A) 10 cents per cubic foot.
B) 20 cents per cubic foot.
C) 30 cents per cubic foot.
D) 40 cents per cubic foot.

Question

-Given the market demand and cost data in the above figure, the existence of two firms equal sized firms producing a total of 8 million cubic feet of natural gas means that the long-run average cost of producing natural gas is
A) 10 cents per cubic foot. 
B) 20 cents per cubic foot. 
C) 30 cents per cubic foot. 
D) 40 cents per cubic foot.

Quizplus · Accepted Answer

In the long run, firms will produce at the minimum point of their average cost curve. If two firms are producing a total of 8 million cubic feet, each firm produces 4 million cubic feet. The long-run average cost at this output level is 20 cents per cubic foot.

-Given the Market Demand and Cost Data in the Above