Suppose a firm is in a perfectly competitive market. 10 Price 9- 8+ 4.55 3.5 1 2 3 4 MC 6 ATC AVC 8 Quantity Suppose currently price is $6, what will happen in the long run? O Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. O Individual firms will earn positive economic profits for now, which will entice other firms to enter the industry in the long run. O Individual firms will earn negative economic profits for now, which will cause some firms to exit the industry in the long run.
Suppose a firm is in a perfectly competitive market. 10 Price 9- 8+ 4.55 3.5 1 2 3 4 MC 6 ATC AVC 8 Quantity Suppose currently price is $6, what will happen in the long run? O Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. O Individual firms will earn positive economic profits for now, which will entice other firms to enter the industry in the long run. O Individual firms will earn negative economic profits for now, which will cause some firms to exit the industry in the long run.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![Suppose a firm is in a perfectly competitive market.
10 Price
9-
8
4.5³
3.5
MC
ATC
AVC
123 4 5 6 7 8 Quantity
Suppose currently price is $6, what will happen in the long run?
O Nothing. The price is consistent with zero economic profits, so
there is no incentive for firms to enter or exit the industry.
O Individual firms will earn positive economic profits for now,
which will entice other firms to enter the industry in the long run.
O Individual firms will earn negative economic profits for now,
which will cause some firms to exit the industry in the long run.
O Because the price is below the firm's average variable costs, the
firms will shut down.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F31ea80ae-9e06-4b97-9467-c167b0c38e2f%2F9eb41477-d714-48d8-a607-013de02eb883%2Ffmnbyro_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose a firm is in a perfectly competitive market.
10 Price
9-
8
4.5³
3.5
MC
ATC
AVC
123 4 5 6 7 8 Quantity
Suppose currently price is $6, what will happen in the long run?
O Nothing. The price is consistent with zero economic profits, so
there is no incentive for firms to enter or exit the industry.
O Individual firms will earn positive economic profits for now,
which will entice other firms to enter the industry in the long run.
O Individual firms will earn negative economic profits for now,
which will cause some firms to exit the industry in the long run.
O Because the price is below the firm's average variable costs, the
firms will shut down.
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