Question

Redraw the diagram describing a competitive firm, and answer the questions below. Price TOT SHARE 0 11. After labeling each curve, lect/mark how much the profit-maximizing firm should produce. (1 point) 12. Identify/draw the area showing total profit at the level of output selected in #11 (1 point) 13. In the long run, if the firms stays in the market, it will produce (more, less) as price (decreases, increases), and the economic profit eventually becomes (positive, zero, negative). Circle the correct ones. (1 point) 4 Page 33 30 999 4 FO A ܟ ܬ % 5 & 7 + 6 8 9 0 E R T Y OP n F H J к L

Answer 1

Answer

P ATC Price AVC MC IS N

ATC = Average total cost; AVC = Average variable Cost, MC = Marginal Cost

11.

Р ATC Price AVC S. MC Q0 ST

The firm sould produce Q0 level of output

12.

ATC Loss Price AVC IS A MC

The firm is earning a loss at athe current market price

14. More, increases, zero

The firm must produce more so as to make zero economic losses. In long term a competitive firm canot make econnomic profit.

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