ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Suppose a firm is in a perfectly competitive market.
10 Price
9-
8
4.5³
3.5
MC
ATC
AVC
123 4 5 6 7 8 Quantity
Suppose currently price is $6, what will happen in the long run?
O Nothing. The price is consistent with zero economic profits, so
there is no incentive for firms to enter or exit the industry.
O Individual firms will earn positive economic profits for now,
which will entice other firms to enter the industry in the long run.
O Individual firms will earn negative economic profits for now,
which will cause some firms to exit the industry in the long run.
O Because the price is below the firm's average variable costs, the
firms will shut down.
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Transcribed Image Text:Suppose a firm is in a perfectly competitive market. 10 Price 9- 8 4.5³ 3.5 MC ATC AVC 123 4 5 6 7 8 Quantity Suppose currently price is $6, what will happen in the long run? O Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. O Individual firms will earn positive economic profits for now, which will entice other firms to enter the industry in the long run. O Individual firms will earn negative economic profits for now, which will cause some firms to exit the industry in the long run. O Because the price is below the firm's average variable costs, the firms will shut down.
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