**Market and Firm Graphs Explanation**The image shows two related graphs. **Left Graph: Market Supply and Demand**- The vertical axis represents Price, while the horizontal axis represents Quantity (Q).- Supply curve (S1) and Demand curve (D1) intersect at point A.- Equilibrium point A corresponds to a price of $3.50 and a quantity of 50,000 units.**Right Graph: Representative Firm’s Cost Curves**- The vertical axis represents Costs ($$$), and the horizontal axis represents Output (Q).- Marginal Cost (MC) curve is depicted in red.- Average Total Cost (ATC) and Average Variable Cost (AVC) curves are shown in blue.- The MC curve intersects with the Marginal Revenue (MR = P) line at point a, corresponding to an output of 400 units.- ATC also intersects MR = P at point a, indicating the long-run equilibrium where firms earn zero economic profit.- Point b on the AVC curve corresponds to an output of 350 units.**Question and Options**"The diagram above depicts overall market supply and demand on the left, and the cost curves for a representative firm supplying in that market on the right. In the long run, we should expect ___________ and the equilibrium price to ___________."- Options: - ○ New firms to enter the market; increase - ○ Existing firms to exit the market; decrease - ○ New firms to enter the market; decrease - ○ Existing firms to exit the market; increaseThis setup is key in evaluating market dynamics and firm behavior over time, particularly in competitive markets.

At equilibrium, demand is equal to supply. So the equilibrium price is $ 3.50. At profit…

Market Representative Firm MC A a MR = P $3.50 - ATC $2.50 - AVC 50,000 350 400 Quantity (Q) Output (Q) The diagram above depicts overall market supply and demand on the left, and the cost curves for a representative firm and the equilibrium price to supplying in that market on the right. In the long run, we should expect new firms to enter the market; increase existing firms to exit the market; decrease new firms to enter the market; decrease existing firms to exit the market; increase

Market Representative Firm MC A a MR = P $3.50 - ATC $2.50 - AVC 50,000 350 400 Quantity (Q) Output (Q) The diagram above depicts overall market supply and demand on the left, and the cost curves for a representative firm and the equilibrium price to supplying in that market on the right. In the long run, we should expect new firms to enter the market; increase existing firms to exit the market; decrease new firms to enter the market; decrease existing firms to exit the market; increase

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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