e. No bariers to entry Question 6 (1 point) (Note: for questions 6-9 refer to th

Question

e. No bariers to entry Question 6 (1 point) (Note: for questions 6-9 refer to the graphs on the right. You can ignore the average variable cost (AVC the purpose of these questions.) Which graph depicts a perfectly competitive firm in long run equilibrium? I. Graph I II. Graph II III. Graph III IV. Graph IV MC Question 7 (1 point) Which graph depicts a firm that is making AVC positive economic profits in the short run? I. GraphI II. Graph II II. Graph III IV. Graph IV MC Question 8 (I point) ATC Which two graphs depict a firm that is making a loss in the short run (cirele both)? AVC I. Graph I II. Graph II III Graph III IV. Graph IV (IV) Question 9 (1 point) Which graph depicts a short run situation which would encourage entry of new firms in the long nu I. GraphI II Graph II III. Graph III IV. Graph IV

Explanation / Answer

Question 6

Graph II. In the long run, perfectly competitive firm will be in equilibrium when P=MC and MC=AC. The firm is able to cover the ATC.

Question 7

Graph I, because price is greater than ATC.

Question 8

Graphs III and IV, since price is lower than the ATC.

Question 9

Graph I, because the firm is earning super normal profit. P is greater than ATC.

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