Firm Aleph operates in a perfectly competitive market in a constant-cost industry and is earning negative economic profit.Why might Firm Aleph continue to operate despite earning negative economic profit? Explain.Draw correctly labeled side-by-side graphs for Firm Aleph and the market it operates in. Label the axes and all of the following:Market price (PE) and market quantity (QE)The firm's quantity of output (Qe)The firm's average total cost (ATC)Completely shade the area of the firm's total revenue.Identify whether the following increase, decrease, or remain constant as the market moves to long-run equilibrium:Market equilibrium quantityMarket equilibrium priceAssume the product that Firm Aleph produces has a positive externality. Draw the marginal social benefit (MSB) on the market graph from part (b).Will the unregulated market produce more or less than the socially optimal quantity?Shade the area of deadweight loss caused by the externality, when the market is unregulated and in long-run equilibrium.

A perfectly competitive market refers to a market in which there are huge number of sellers and…

Answered: Firm Aleph operates in a perfectly…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Firm Aleph operates in a perfectly competitive market in a constant-cost industry and is earning negative economic profit.

Why might Firm Aleph continue to operate despite earning negative economic profit? Explain.
Draw correctly labeled side-by-side graphs for Firm Aleph and the market it operates in. Label the axes and all of the following:
1. Market price (P_E) and market quantity (Q_E)
2. The firm's quantity of output (Qe)
3. The firm's average total cost (ATC)
Completely shade the area of the firm's total revenue.
Identify whether the following increase, decrease, or remain constant as the market moves to long-run equilibrium:
1. Market equilibrium quantity
2. Market equilibrium price
Assume the product that Firm Aleph produces has a positive externality. Draw the marginal social benefit (MSB) on the market graph from part (b).
Will the unregulated market produce more or less than the socially optimal quantity?
Shade the area of deadweight loss caused by the externality, when the market is unregulated and in long-run equilibrium.

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