Question

Question 23 4 pts Use the graph below to answer the following question: 1 Price ATC - AVC 1 2 3 4 5 6 7 8 9 10 11 Quantity If the market price is $8, in the long run, existing firms will exit the market. O Not enough information to answer this question. O firms will neither enter nor exit the market. O new firms will enter the market.

Answer 1

Ans.23. d) new firms will enter the market.

If the market price is $8, in the long run, then P> ATC,  the firm earns an economic profit in the market which will attract the other firms to enter the market and the supply of the good will increase in the market and the price will fall until it will reach to the minimum of the average total cost where each firm will earn a normal profit ( zero economic profit ).