ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Use the graph below of a perfectly competitive firm to answer these questions and assume that the industry price is $P4
Price
P₂
aaaa
P₁
MC
AVC
ATC
Q₁Q₂
Q3 Q4
Quantity
1. At an industry price of P4, what is the profit mazimizing level of output and what type of profit/loss is the firm earning
2. If there is a decrease in industry demand causig the industry price to fall to P2, what is the profit maximizing level output, pr
position of the firm or is this firm producing in the short run?
3. What industry price represents the long run profit position for the firm?
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Transcribed Image Text:Use the graph below of a perfectly competitive firm to answer these questions and assume that the industry price is $P4 Price P₂ aaaa P₁ MC AVC ATC Q₁Q₂ Q3 Q4 Quantity 1. At an industry price of P4, what is the profit mazimizing level of output and what type of profit/loss is the firm earning 2. If there is a decrease in industry demand causig the industry price to fall to P2, what is the profit maximizing level output, pr position of the firm or is this firm producing in the short run? 3. What industry price represents the long run profit position for the firm?
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