Question 6 (1 point) (Note: for questions 6-9 refer to the graphs on the right.

Question

Question 6 (1 point) (Note: for questions 6-9 refer to the graphs on the right. You can ignore the average variable cost 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 MC IV. Graph IV Question 7 (I point) Which graph depicts a firm that is making MC ATC ATC AVC AVC positive economic profits in the short run? I Graph I II. Graph II III. Graph III IV. Graph IV MC MC Question 8 (1 point) ATC AVC ATC Which two graphs depict a firm that is making a loss in the short run (circle both)? AVC I. Graph 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 run? I. GraphI II. Graph II III. Graph III IV. Graph IV

Explanation / Answer

6. Graph II (since P = MC = ATC)

7. Graph I (since P > ATC)

8. Graph III and Graph IV (since P < ATC)

9. Graph I (since profits are positive)

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