3. In the space below, sketch a graph of a typical firm (say, a corm farmer) in

Question

3. In the space below, sketch a graph of a typical firm (say, a corm farmer) in long run equilibrium in a perfectly competitive market. (Show P, MR, ATC, MC, LRAC, etc.) Note: You will need two graphs; one for the market and the other for the firm. Market Firm ?AC A 2 What is the above firm's economic profit in long run equilibrium? a. If demand for the above product were to increase, in the short run we would expect the producer to in the price of the product. Firms in the market would now be generating an b. production in response to a/an economic However, in the long run, this temporary economic would encourage outside firms to Thus the market supply of the product would," - - - price to ng the product and economic profits to economics c. In the long run all remaining firms are left generating profits.

Explanation / Answer

a)For a perfectly competitive firm, long-run economic profit is zero.

b)increase,an increase,profit/surplus,profit,enter,increase,fall/decrease,fall,become zero/decrease.

c)zero

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