Homework Answers
1 - Option A
New corn farmers will enter the corn industry
Seeing the profits in the market , new farmers will be attracted to enter in corn farming.
As a result the profits will decline in long run and not increase, long run losses cannot be said , but there will be earning of normal profits in long run. Hence other options except A are wrong.
2 - Option C
Decrease its output but continue to produce.
The MR = MC condition must be satisfied. In above condition MC is greater than MR , hence marginal cost is to be reduced by decreasing output.
If output will be increased , MC will increase. Since ATC is less than price , no need for shut down. Thus option C will be correct.
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