Illustrate diagrammatically (in six separate diagrams) an example of a company making the following profits in the short term and in the long run:ZeroPositiveNegativeThe key issue in this activity is the time frame: the short run or the long run. there is a clear distinction between short and long run and how that impacts the different types of costs a firm faces. marginal costs, fixed costs or variable costs.questions to consider are:Is there any difference between the short and long run in how the firm decides where the profit maximisation point is? Why or why not?Compare the diagrams between the two time periods in case (I) and then in case (II) and, finally, in case (III). How are they similar and how are they different?In the case of short run production in case (III), if we assume that the company continue to produce in the short run, what assumption must we be making about the price and average variable cost? Explain.Does it make sense to talk about case (III) in the long run? That is, if you were an investor, would you invest in such a firm if it was in the long run?please make sure to draw the diagram(s) with care by labelling the axes appropriately and fully explaining your reasoning.

Short run: a period of time during which at least one input in production is fixed (i.e., cannot be…

Answered: Illustrate diagrammatically (in six…

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Firms In Competitive Markets

Section: Chapter Questions

Problem 4PA

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Illustrate diagrammatically (in six separate diagrams) an example of a company making the following profits in the short term and in the long run:

Zero
Positive
Negative

The key issue in this activity is the time frame: the short run or the long run. there is a clear distinction between short and long run and how that impacts the different types of costs a firm faces. marginal costs, fixed costs or variable costs.

questions to consider are:

Is there any difference between the short and long run in how the firm decides where the profit maximisation point is? Why or why not?
Compare the diagrams between the two time periods in case (I) and then in case (II) and, finally, in case (III). How are they similar and how are they different?
In the case of short run production in case (III), if we assume that the company continue to produce in the short run, what assumption must we be making about the price and average variable cost? Explain.
Does it make sense to talk about case (III) in the long run? That is, if you were an investor, would you invest in such a firm if it was in the long run?

please make sure to draw the diagram(s) with care by labelling the axes appropriately and fully explaining your reasoning.

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