The diagrams below show short-run cost curves for four perfectly competitive firms. Assume that each firm...
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The diagrams below show short-run cost curves for four perfectly competitive firms. Assume that each firm faces a market price po. 10 MC MC ATC ATC AVC AVC Po Po Quantity Quantity (i) Firm 1 (ii) Firm 2 MC ATC MC ATC Avc AVC AVC Po Po Quantity Quantity (iii) Firm 3 (iv) Firm 4 a. Which firms could earn positive profits at some level of output? Why? b. Which firms would be incurring losses at their profit maximizing level of output, but will continue producing in the short run? Why? C. Which firms will choose not to produce at price po? Why? Price Price Price The diagrams below show short-run cost curves for four perfectly competitive firms. Assume that each firm faces a market price po. 10 MC MC ATC ATC AVC AVC Po Po Quantity Quantity (i) Firm 1 (ii) Firm 2 MC ATC MC ATC Avc AVC AVC Po Po Quantity Quantity (iii) Firm 3 (iv) Firm 4 a. Which firms could earn positive profits at some level of output? Why? b. Which firms would be incurring losses at their profit maximizing level of output, but will continue producing in the short run? Why? C. Which firms will choose not to produce at price po? Why? Price Price Price
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