Answered: 1.The market for fertilizer is…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1.The market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently making economic losses.

Which of the following statements is true about the price of fertilizer? Check all that apply.

A. The price of fertilizer must be less than marginal cost.

B. The price of fertilizer must be equal to average variable cost.

C. The price of fertilizer must be less than average total cost.

2. If firms in the market are producing output but are currently making economic losses,_________ illustrates the present situation for the typical firm in the market, and_________ indicates the corresponding supply curve.

Assuming there is no change in either demand or the firm's cost curves, which of the following statements is true about what will happen in the long run? Check all that apply.

A.The quantity supplied by each firm will decrease.

B.The total quantity supplied to the market will decrease.

C.The price of fertilizer will increase.

D.Marginal cost will decrease.

E. Average total cost will decrease.

The following graphs show the cost curves faced by a typical firm, the demand for fertilizer, and possible price and supply curves.
Firm
Market
Demand
S,
ATC
TAVO
MC
Quantity
Quantity
Price and Costs
P.
Price
P.

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