Question

Econ 250 4. (4 points) Refer to the following graph, which depicts a firm operating in a competit market Chagter 9 Homework to answer questions a-c. Price l and Cost MC $50 MR $40 $37 20 25 Quantity aHow many units of output will this firm produce to maximize profit? b. At this firm's profit-maximizing quantity, how much profit will this firm earn? In the long run, is it likely that new firms will enter the market where this firm is currently operating? Explain your answer in 1-2 sentences. c 5. (2 points) Use the following words to fill in the blanks, which summarize an adjustment to a decrease in supply increase greater decrease entry minimum ATC zero increase positive zero Suppose the grape market operates in long-run equilibrium. The price is equal to A wildfire in California and firms in the market earn an economic profit equal to destroys the grapes grown in many vineyards. Therefore, the supply of grapes wil and the price of grapes will Since the remaining grape growers now receive a higher price, they will the production of grapes. In the short run, price is than average total cost. And grape growers in the market make a of new Leconomic profit. The economic profits will lead to the grape growers. Entry will continue until all grape growers in the market earn an economic profit equal to

Answer 1

- Profit is max when MR-me This Oty = 25 unit Rofit = (P-AC) XO 3 s res, due to free entry & exit , new form enter until puie = 37. should perio - men of ATC in layoun eg". Cronomie perefit to. ss of geopes will decrease 4 puis of grapes will increase Remein by grape growres they will increase produchor of grepes In shornen ferie > AR. merbet nabes a positive eco profit Eror poft will lead to the enby of new forums inilaw prof equal to zero