Price and cost (dollars) P P LR 0 Long-run Adjustment of Firm Size SMC, SAC, SMC₂ SAC₂ SMC Q₂ Quantity SAC3 QLR SMC Q₂ SAC, LAC O Firm size #1 is making a profit but less profit than firm size #2. O Firm size #2 is making a total profit at price P equal to price P minus SAC2 by operating at quantity Q2. O Firm size #2 must downsize its operations if the price falls to PLR- O Firm size #4 is making an average profit at price P equal price P minus SAC4 by operating at Q4-

Price and cost (dollars) P P LR 0 Long-run Adjustment of Firm Size SMC, SAC, SMC₂ SAC₂ SMC Q₂ Quantity SAC3 QLR SMC Q₂ SAC, LAC O Firm size #1 is making a profit but less profit than firm size #2. O Firm size #2 is making a total profit at price P equal to price P minus SAC2 by operating at quantity Q2. O Firm size #2 must downsize its operations if the price falls to PLR- O Firm size #4 is making an average profit at price P equal price P minus SAC4 by operating at Q4-

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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