Question 2: Consider a firm in a perfectly competitive market that should produce a positive quantity...
Question 2: Consider a firm in a perfectly competitive market that should produce a positive quantity in the short-run, but is still earning a loss.
A.) Draw the cost curves (ATC, AVC, MC, MR) for the firm. Clearly label the quantity this firm would produce. Label the loss the firm would incur.
B.) Briefly explain why the MR looks the way it does and why you placed it where you did on your diagram. (How do we determine MR for a firm in perfect competition? How do we use information above to specifically place the MR curve on our diagram?)
C.) What does the firm do in the short-run? Clearly explain your answer.
D.) What will happen to the MARKET in the long-run? Clearly explain your answer.
Answer:
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Question 2: Consider a firm in a perfectly
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should they continue to produce in the short run if they wish to
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Explain.
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