if the cost of plaster and labor were $13 per gnome and everything else is as in the problem (gnome molds cost $1,000, interest rate is 10%) , what is the lowest price of gnomes at which there would be a positive supply in the long run?

A) $14.30
B) $26
C) $15.20
D) $13
E) $15.60

To find the lowest price of gnomes at which there would be a positive supply in the long run, we need to find the point at which the price equals the long-term average cost (LTAC) of producing the gnomes. We can use the formula:

LTAC = Total Cost / Quantity

Total Cost = (Cost of Plaster + Cost of Labor + Cost of Molds + Interest on Molds) * Quantity
Total Cost = ($13 + $13 + $1,000 + 0.10*$1,000) * Quantity
Total Cost = $1,260 + $100 * Quantity

LTAC = ($13 + $13 + $1,000 + 0.10*$1,000) = $260

Setting LTAC = Price, we get:

$260 = Price
Price = $15.20

Therefore, the lowest price of gnomes at which there would be a positive supply in the long run is $15.20, so the best choice is C.