The figure shows the market demand curve for bread, together with original and new supply curves, where the curve has shifted due to new bakeries entering the market. All bakeries are identical, and there are no entry costs. Which of the following statements is correct? 4.5 4.0 3.5 3.0 2.5 €2.0 1.5 1.0 Price, € 0.5 0.0 Original supply New supply Demand 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Quantity: number of loaves O The bakeries' marginal cost of production has fallen. With the fall in price, the bakeries now make a loss. The supply of bread has become less elastic. New bakeries will continue to enter until the market price equals the firms' average cost.

The figure shows the market demand curve for bread, together with original and new supply curves, where the curve has shifted due to new bakeries entering the market. All bakeries are identical, and there are no entry costs. Which of the following statements is correct? 4.5 4.0 3.5 3.0 2.5 €2.0 1.5 1.0 Price, € 0.5 0.0 Original supply New supply Demand 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Quantity: number of loaves O The bakeries' marginal cost of production has fallen. With the fall in price, the bakeries now make a loss. The supply of bread has become less elastic. New bakeries will continue to enter until the market price equals the firms' average cost.

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter10: Price-searcher Markets With Low Entry Barriers

Section: Chapter Questions

Problem 17CQ

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