Suppose that production of wheat is a perfectly competitive market / industry. Given the following information currently for the wheat market:

Price = $5.50 per bushel

ATC = $6.00 per bushel

AVC = $5.00 per bushel

Where ATC is average total cost and AVC average variable cost. Should these firms shut-down and sell their farms? What will happen in the long-run to these producers and thus the market / industry in terms of their profits / losses? Explain your answer by reference to specific market rules and to the adjustment process

Answer rating: 100% (QA)

Since market price is higher than AVC the firms can ... View the full answer