8. Problems and Applications Q8 The market for fertilizer is perfectly competiti

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8. Problems and Applications Q8 The market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently making economic losses.

8. Problems and Applications Q8 The market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently making economic losses. Which of the following statements is true about the price of fertilizer? Check all that apply. The price of fertilizer must be greater than average total cost. The price of fertilizer must be greater than marginal cost. The price of fertilizer must be greater than average variable cost.

Explanation / Answer

1. The price of fertilizer must be greater than Average variable cost.

2. P2 is the current price where firm is suffering losses because ATC is greater than price.

3. S1 is the supply curve

4. Marginal cost will increase.

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