MC ATC 14 Quantity Figure 1 shows the perfectly competitive market a certain fir

Question

MC ATC 14 Quantity Figure 1 shows the perfectly competitive market a certain firm faces. What do you expect to happen in the long run? Firms will exit and firms will make positive profit Firms will enter and all firms will make zero profit Firms will enter and firms will make positive profit Firms will exit and firms will make zero profit Price MC ATC 14 Quantity Figure 1 shows the perfectly competitive market a certain firm faces. What is the profit maximizing quantity for this firm? 14 Question MC ATC 14 Quantity Figure 1 shows the perfectly competitive market a certain firm faces. What is the profit for this firm? $18 $0 $28 $12

Explanation / Answer

7. Ans: Firms will enter and all firms will make zero profit

Explanation:

In the figure, it is seen that existing firms are earning positive economic profit. Because ATC curve is below the price line. So, this positive economic profit will attract new firms to enter into the industry. The new firms will enter till all firms will make zero profit.

8. Ans: 9

Explanation:

The profit maximizing condition is: P = MC. It is seen from the table that P = MC at the output level of 9.

3. Ans: $18

Explanation:

Profit = TR - TC = (P *Q) - (ATC * Q)

         = ($5 * 9) - ($3 * 9)

         = $18

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