The graph below shows cost curves for a typical firm operating in a perfectly competitive market. Curve 1 represents Marginal Cost (MC), Curve 2 represents Average Variable Costs (AVC) and Curve 3 represents Average Total Costs (ATC). Suppose that the equilibrium price is $12. What will happen in this market in the long run?
The graph below shows cost curves for a typical firm operating in a perfectly competitive market. Curve 1 represents Marginal Cost (MC), Curve 2 represents Average Variable Costs (AVC) and Curve 3 represents Average Total Costs (ATC). Suppose that the equilibrium price is $12. What will happen in this market in the long run?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
The graph below shows cost curves for a typical firm operating in a
Suppose that the
a. No new entry/no exit.
b.Existing firms will exit.
c.New firms will enter.
Transcribed Image Text:Price of Oranges ($)
21
20
19
18
17
16
15
14
13
12
11
10
9
8
96
7
5
4
325
2
1
O
0
Curve 3
1
Curve 1
Curve 2
2
3
4
5
Quantity of Oranges
LO
7
8
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