Wheat Industry & Perfect Competition Question (Check Work)?

Question

Consider a perfectly competitive market for bushels of wheat. The graph below shows the cost curves for a typical firm in the industry.

Here's the Graph: http://courses.aplia.com/problemsetassets/textbooks/arnold_micro_8e/ch20_II/7_static_graph.gif

n the long run, there is free entry into the market. As firms enter and the price falls, at what price will firms stop entering the wheat industry?

A. 40 cents per bushel

B. 60 cents per bushel

C. 20 cents per bushel

D. 75 cents per bushel

Will it be 60 (B) cents per bushel? I'm somewhat confused by this question.

Answer 1

I don't think the question is worded too well.  I agree I think at both 40 cents/bushel and 60 cents per bushel, firms would stop entering it.  Why?  Because no profit is to be made in either case.  But if I had to guess..I would put B.  Because after it reaches 60 cents per bushel, there is no incentive for other firms to enter.  If they enter the market, price will fall and there will be no benefits.  Instead, there would be negative profit.  So I'm 70% sure its B.  Hope I helped. :)

Answer 2

Equalibrium and is the same at the $60 curve and at the $40 curve.

The curve raises at these two point indentical there is no added benefit, therefore, A  or B would be correct