The orange farming industry is perfectly competitive and is initially in long-run equilibrium, and the price of each orange is $0.20. Now suppose that the price of fertilizer rises, increasing the marginal and average total cost of producing oranges by $0.10. In the long run:_______.

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15-03-2022
Business

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The orange farming industry is perfectly competitive and is initially in long-run equilibrium, and the price of each orange is $0.20. Now suppose that the price of fertilizer rises, increasing the marginal and average total cost of producing oranges by $0.10. In the long run:_______.

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Parrain Parrain · Answer 1 · 2022-03-22T15:03:01+01:00

Based on the marginal and average total cost rising, we can conclude that in the long run firms will leave the industry.

Why would they leave the industry?

Firms will exit a competitive industry when the price is below the marginal cost.

In this case, the price was $0.20 and the marginal cost increased by $0.10. If we take into account, the original marginal cost which has now increased, the new marginal cost will most probably be higher than the price.

Firms will then leave the market to avoid losses.

Find out more on competitive industries in the long run at https://brainly.com/question/25701641.