BackPerfect. Comp Assignment.pdf1. Draw a graph representing a perfectly competitive firm earning an economic profit.(Make sure to show both the firm and the industry graphs)What happens over-time, if many firms are earning economic profits?Is this good or bad for consumers? Explain.2. Now draw a firm operating under perfect competition that is losing money but shouldstill stay open in the short run. (Again, show both the firm and the industry graphs)lendarTo DoA NotificationsM Inbox darsSatWhat happens over-time, if many firms are earning economic profits?27Is this good or bad for consumers? Explain.2. Now draw a firm operating under perfect competition that is losing money but shouldstill stay open in the short run. (Again, show both the firm and the industry graphs)What happens over-time, if many firms are suffering economic losses?Is this good or bad for consumers? Explain.CalendarTo DoNotificationsxoqu W

Since you have asked multiple question, we will solve the first question for you. If you want any specific question to be solved then please specify the question number or post only that question. Thank you. 1. A perfectly competitive firm is a price taker and can sell any quantity of the commodity at the market determined price. a) The optimum level of output for a perfect competitive firm is determined at the point where P Or MR equals MC and MC is rising. At this level of output, the firm can either make a profit, break even or incur a loss. Since P is higher than the ATC at the best level of output, the firm makes an economic profit. b) Over time if the firms are making economic profit, many more firms will be attracted to the industry. This will reduce the economic profits made by the existing firms and eventually all firms make zero economic profits in the long run. c) It is good for consumers. In the long run when more firms enter the industry, all firms produce at the lowest point of their LAC curve. Thus resources are used more efficiently at the minimum cost. Also the aggregate output expands with more number of firms. Thus consumers get the most desired quantity at the lowest possible price and they are better off.

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1. Draw a graph representing a perfectly competitive firm earning an economic profit. (Make sure to show both the firm and the industry graphs) What happens over-time, if many firms are earning economic profits? Is this good or bad for consumers? Explain.

1. Draw a graph representing a perfectly competitive firm earning an economic profit. (Make sure to show both the firm and the industry graphs) What happens over-time, if many firms are earning economic profits? Is this good or bad for consumers? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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