Suppose the market demand for milk is Qd = 150 - 5P. Additionally, suppose that a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. What is the new long-run equilibrium price?

A. $20 per unit

B. $40 per unit

C. $24 per unit

D. $2 per unit


A. $20 per unit

Economics

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