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Anettt [7]
3 years ago
15

Assume a perfectly competitive industry making peanuts is in long-run equilibrium. The price per pound of peanuts is $2. Next, a

ssume that the demand for peanuts increases in the short run, and the price rises to $4 per pound. If this is a constant cost industry, what price per pound should we expect in the long-run
Business
1 answer:
rjkz [21]3 years ago
4 0

Answer:

The price of the item in long run equilibrium will be the same i.e $ 2 per unit

Explanation:

Given

The equilibrium price in the long run = $ 2 per unit

The price of the item in long run equilibrium will be the same i.e $ 2 per unit

The increase of price in short run will not have much impact on the Average variable cost and hence in long run the price will remain constant.

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Answer:

P V = 1669,5

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After seven years, future payment will be 9800$ and from there on we will have 23 annual payments more:

P V = 9800/(1+0.08)^23 = 9800/5,87 = 1669,5

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