This diagram represents the cost structure for a single perfectly competitive fi

Question

This diagram represents the cost structure for a single perfectly competitive firm. When answering the questions on the answer sheet, please write in the correct answer. (NOTE: When answering question 9-12, put only the correct choice in the answer sheet at the end of the quiz.) 52. (a) At Price P1 (still using the previous diagram) what amount will the firm produce? (b)Will the firm be making a profit or a loss (indicate the correct choice)? (c) What will happen to the number of firms in this industry in the long run (indicate the correct choice)? a. Q = _____ b. PROFIT LOSS NEITHER c. INCREASE DECREASE REMAIN THE SAME

Explanation / Answer

a) Q = 47 As p1 exceeds AVC (and ATC) at the loss— minimizing output. Using the MR = MC rule it will produce 47 units. b) Profits profit per unit = ( p1 - ATC); c) increase

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