(Table: Lunch) Use Table: Lunch.This table shows market demand for picnic lunches for people taking all-day rafting trips on the river.Suppose that the marginal cost and average cost of each lunch are a constant $4 for all firms in the market.What is producer surplus in this market in the long run?

A) $0
B) $4
C) $180
D) $360

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Shane Clark · Accepted Answer

Final Answer : A, Explanation :  In the long run, competitive markets will reach an equilibrium where price equals marginal cost. Since the marginal cost and average cost are given as a constant $4, firms will sell their product at this price to cover their costs. Producer surplus, which is the difference between what producers are willing to accept and what they actually receive, will be $0 because they are selling the product at their cost of production.

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