Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: 10 9 8- 7- 6 2 1 Price MC ATC AVC 1 23 4 56 7 8 Quantity Refer to Figure 14-13. If the price is $2 in the short run, what will happen in the long run? a. Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry. b. Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. ●c. Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry. d. Because the price is below the firm's average variable costs, the firms will shut down.
Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: 10 9 8- 7- 6 2 1 Price MC ATC AVC 1 23 4 56 7 8 Quantity Refer to Figure 14-13. If the price is $2 in the short run, what will happen in the long run? a. Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry. b. Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. ●c. Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry. d. Because the price is below the firm's average variable costs, the firms will shut down.
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter8: Perefect Competition
Section: Chapter Questions
Problem 5SQP
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Transcribed Image Text:Figure 14-13
Suppose a firm in a competitive industry has the following cost curves:
10
9-
8
7.
6
اکیه
3.5
2
1-
Price
1 2 3
4
MC
5 6 7 8
ATC
AVC
Refer to Figure 14-13. If the price is $2 in the short run, what will happen in the long run?
◆a. Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry.
b. Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry.
● C. Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.
d. Because the price is below the firm's average variable costs, the firms will shut down.
45
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