Figure 11-1
-The Red Cross is virtually the only operator of blood banks in the United States.In Figure 11-1 are the demand and cost curves facing the Red Cross blood bank.If the Red Cross were to set price and quantity at the level that it would obtain in the long run in a competitive industry, how much blood would it sell?
A)OA
B)OB
C)OD
D)OC

Question

Figure 11-1 
-The Red Cross is virtually the only operator of blood banks in the United States.In Figure 11-1 are the demand and cost curves facing the Red Cross blood bank.If the Red Cross were to set price and quantity at the level that it would obtain in the long run in a competitive industry, how much blood would it sell?
A)OA 
B)OB 
C)OD 
D)OC

Quizplus · Accepted Answer

In a competitive market, firms set quantity at the level where marginal cost equals marginal revenue, which is also the point where the demand curve intersects the marginal cost curve. In this case, that point is at OC, where the Red Cross would sell 20 units of blood. At this level of output, the price would be P = $50, which is the intersection of the demand and average total cost curves. Therefore, the best choice is D) OC.

Figure 11-1 -The Red Cross Is Virtually the Only Operator of Blood