Consider a perfectly competitive market with identical firms. Each firm faces following average variable cost (AVC) function: 1 AVC(Q) = (Q- 40)2 + 25 40 If each firm's marginal revenue is equal to its marginal cost when (Q,P) = (40,20), what should happen to long-run prices? O A. Rise B. Stay the same C. Fall This happens because firms A. are earning positive short-run profit B. are breaking even C. are earning short-run economic loss DOO

Consider a perfectly competitive market with identical firms. Each firm faces following average variable cost (AVC) function: 1 AVC(Q) = (Q- 40)2 + 25 40 If each firm's marginal revenue is equal to its marginal cost when (Q,P) = (40,20), what should happen to long-run prices? O A. Rise B. Stay the same C. Fall This happens because firms A. are earning positive short-run profit B. are breaking even C. are earning short-run economic loss DOO

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Firms In Competitive Markets

Section: Chapter Questions

Problem 5CQQ

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Question

Consider a perfectly competitive market with identical firms. Each firm faces following average variable cost (AVC) function:
1
AVC(Q) =
(Q-40)2 + 25
40
If each firm's marginal revenue is equal to its marginal cost when (Q,P) = (40,20), what should happen to long-run prices?
O A. Rise
B. Stay the same
C. Fall
This happens because firms
A. are earning positive short-run profit
B. are breaking even
O C. are earning short-run economic loss
O O O

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