Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 8, Problem 12P
To determine
The reason behind the upward slope of increasing cost industry in the long run. The causes leading to the increasing costs in the increasing cost industry.
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Question 16
(Short-Run Profit Maximization) A perfectly competitive firm has the following fixed and variable costs in the short run. The market price for the firm’s product is $150.
Profit/Output FC VC TC TR Loss
PRICE (Dollars per ton)
80
72
64
56
48
40
32
24
16
8
0
0
Demand
120 240 360 480 600 720 840 960 1080 1200
QUANTITY (Thousands of tons)
Supply (20 firms)
Supply (40 firms)
Supply (60 firms)
True
False
(?)
If there were 60 firms in this market, the short-run equilibrium price of steel would be
$
per ton. At that price, firms in this industry would
Therefore, in the long run, firms would
the steel market.
Because you know that competitive firms earn
economic profit in the long run, you
know the long-run equilibrium price must be $
per ton. From the graph, you can see that
this means there will be firms operating in the steel industry in long-run equilibrium.
True or False: Assuming implicit costs are positive, each of the firms operating in this industry in
the long run earns positive accounting profit.
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