Foundations of Economics (8th Edition)
Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 15, Problem 11IAPA
To determine

To explain:

The fall in grain prices in 2015 and the change in soybean farmer's economic profit.

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(1) Use the graph to answer the question below. The quantity is measured in thousands of units. What will this firm decide to do in the long run? A-It will stay in the market because the price is above its AVC at its profit-maximizing output.  B-It will leave the market because the price is below its ATC at its profit-maximizing output. C-It will increase its price to point B to earn normal profit. D-It will increase its output until its profit-maximizing output level is equal to B. E-Insufficient data to determine.   (2) A dairy farmer is operating in a perfectly competitive market. The market price for milk is between the farmer's average variable cost and average total cost at the profit-maximizing level of output. What will the farmer do?  A-Produce more milk.  B-Produce less milk.  C-Shut down in the short run.  D-Operate in the short run and leave the industry in the long run.  E-Insufficient information to determine (3) A firm operating in a perfectly competitive market cannot…
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