<p>The long run equilibrium price should be <span class="math-container">$\$ y,$</span> however, in the short run, we only know that price must be higher that the minimum average variable cost (of which no info is given).</p>

<p>In the long run all production takes place at the minimum average cost. All firms with average cost higher than <span class="math-container">$\$y$</span> will either adapt their technology and reduce their costs or exit the market. </p>

CC BY-SA 4.0
2019-03-08T01:49:06.703Z
Hi Patricio, thanks for your answer. Could you please elaborate why it is $y, in terms of a simple argument? It would help me very much.
Joebevo
CC BY-SA 4.0
2019-03-11T04:53:28.750Z
Just one clarification: In the long run, does production take place at the minimum average VARIABLE cost?
Joebevo
CC BY-SA 4.0
2019-03-11T08:11:32.373Z
No, in the long run all costs need to be covered by the price. Otherwise, the firm would have looses
Patricio
CC BY-SA 4.0
2019-03-07T14:06:31.400Z
2019-03-09T19:41:30.933Z
2019-03-09T19:41:30.933Z
Patricio
<p>Let's suppose that it costs producers a minimum of <em>y</em> dollars to produce a widget (it may actually cost more, depending on the producer, but that is the bare minimum). In a competitive equilibrium, where there are several producers of this identical widget, would the selling price of the widget be $y? </p>

<p>Please explain your reasoning.</p>

<hr>

<p>EDIT:</p>

<p>I have arrived at the selling price of $y based on <a href="https://www.economics.utoronto.ca/osborne/2x3/tutorial/CEFRM.HTM" rel="nofollow noreferrer">this algorithm</a>.</p>

CC BY-SA 4.0
2019-03-09T20:35:20.747Z
Are those the marginal or average costs?
BB King
CC BY-SA 4.0
2019-03-10T09:04:58.797Z
@BBKing: Average costs
Joebevo
<markets><competitive-equilibrium>
Selling price of a widget at competitive equilibrium
Joebevo
# Selling price of a widget at competitive equilibrium

(Asked by: username_0 on 2019-03-07)

Let's suppose that it costs producers a minimum of *y* dollars to produce a widget (it may actually cost more, depending on the producer, but that is the bare minimum). In a competitive equilibrium, where there are several producers of this identical widget, would the selling price of the widget be $y?

Please explain your reasoning.

---

EDIT:

I have arrived at the selling price of $y based on [this algorithm](https://www.economics.utoronto.ca/osborne/2x3/tutorial/CEFRM.HTM).

**Tags:** markets, competitive-equilibrium
> **Comments:**
> **username_1**: Are those the marginal or average costs?  
> **username_0**: @BBKing: Average costs  

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## 1 answers

### Answer by username_2 on 2019-03-07. Score: 1

The long run equilibrium price should be $\$ y,$ however, in the short run, we only know that price must be higher that the minimum average variable cost (of which no info is given).

In the long run all production takes place at the minimum average cost. All firms with average cost higher than $\$y$ will either adapt their technology and reduce their costs or exit the market.

> **Comments:**
> **username_0**: Hi Patricio, thanks for your answer. Could you please elaborate why it is $y, in terms of a simple argument? It would help me very much.  
> **username_0**: Just one clarification: In the long run, does production take place at the minimum average VARIABLE cost?  
> **username_2**: No, in the long run all costs need to be covered by the price. Otherwise, the firm would have looses  

---

