**Text Explanation:**3. The Binkle Binder Corporation sells 3-ring binders in a perfectly competitive market at a price of $3 each. The firm's marginal cost, average total cost, and average variable cost curves can be represented by the following:**Graph Explanation:**- **Axes:** - The vertical axis represents the price and cost. - The horizontal axis represents the quantity (q).- **Curves:** - **MC (Marginal Cost):** The upward-sloping curve that intersects the average total cost (ATC) and average variable cost (AVC) curves from below. - **ATC (Average Total Cost):** U-shaped curve that lies above the AVC curve. - **AVC (Average Variable Cost):** U-shaped curve that lies below the ATC curve.- **Price Line (d=MR):** A horizontal line at the price level of $3, indicating the demand equals marginal revenue in a perfectly competitive market.- **Intersection Points:** - The MC curve intersects the ATC and AVC curves at various points.**Question:**Should the firm continue to operate in the short run?

No, firm should exit the marketSince, price is below both ATC and AVC. Firm should continue when price is greater or equal to ATC. Firm can also continue even when price is less than ATC but greater than AVC.When price is equal to ATC,it is called a break even point. When price is equal to AVC, it is called shutdown point. When price goes below shutdown point, firm should exit as it is unable to cover even it's variable cost

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Economics

3. The Binkle Binder Corporation sells 3-ring binders in a perfectly competitive market at a price of $3 each. The firm's marginal cost, average total cost, and average variable cost curves can be represented by the following: Ť price 3 Should the firm continue to operate in the short run? MC 9 ATC AVC d=MR

3. The Binkle Binder Corporation sells 3-ring binders in a perfectly competitive market at a price of $3 each. The firm's marginal cost, average total cost, and average variable cost curves can be represented by the following: Ť price 3 Should the firm continue to operate in the short run? MC 9 ATC AVC d=MR

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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