Question

Assume the market for organic produce sold at farmers' markets is perfectly competitive. All else equal, as more farmers choose to produce and sell organic produce at farmers' markets, what is likely to happen to the equilibrium price of the produce and profits of the organic farmers in the long run?

A) The equilibrium price is likely to increase and profits are likely to remain unchanged.
B) The equilibrium price is likely to remain unchanged and profits are likely to increase.
C) The equilibrium price is likely to decrease and profits are likely to decrease.
D The equilibrium price is likely to increase and profits are likely to increase.

Answer 1

The equilibrium price is likely to decrease and profits are likely to decrease.

Step-by-step explanation:

In the long run, more farmer will sell organic, there will be more organic products in the market and the price will decrease. The profits will decrease because in the long run the price is equal to the marginal cost, and the profits will be the same as the non organic products. In a competitive market in the long run, the profits are the same and the price is equal to the marginal cost.