Question

No Spacing Heading1 Heading 2 Figure 1 25 50 75 100 125 150 175 200 225 250 Output 1. Figure 1 is the graph of a A. Price Takerl B. Price Searcher with low entry barriers C. Price Searcher with high entry barriers D. Could be either B or C 5 6 8 9 0

Answer 1

1.

As it can be seen in the graph that, MR and Price are same in the form of horizontal line, so it is the case of perfect competition in which firm is price taker while the price is determined by the industry.

Hence figure 1 is the graph of the price taker.

Hence option A is the correct answer.

Option A; price taker.

2.

Figure 1, shows the condition of break even because Price is equal to the ATC, it means firm is able to cover all its economic costs( accounting cost and opportunity costs).

Hence option A is the correct answer.

option A; breaking even.

3

The economic profit= TR-TC

=P*Q-AC*Q

=(P-AC)*Q

=0

Since price and AC are equal in this case, so the profit will be zero.

Profit=0

4.

This firm is in the long-run because in the case of perfect competition

Price= minimum of ATC=MC

As it can be seen in the graph, that price=minimum of ATC=MC, so it can be concluded that this is the case of long-run.

Hence option B is the correct answer.

option B; long run.