The following diagram shows the cost curves of a firm under perfect competition. MC 110 100...

 

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The following diagram shows the cost curves of a firm under perfect competition. MC 110 100 AC 90 AVC 80 70 60 50 40 30 20 10 10 15 20 25 30 35 40 45 Quantity At a price of E40, the firm produces units with an average cost of E and the firm has a profit of E Suppose that the market price jumps to £80. Now the firm produces units with an average cost of E and the firm has a profit of £ Now the market price is £50. In the short run, the firm produces units and the profit at this quantity of output is E In the short run, the firm produces zero if the market price is below £ In the long run, the firm will shut down if the market price is below E The following diagram shows the cost curves of a firm under perfect competition. MC 110 100 AC 90 AVC 80 70 60 50 40 30 20 10 10 15 20 25 30 35 40 45 Quantity At a price of E40, the firm produces units with an average cost of E and the firm has a profit of E Suppose that the market price jumps to £80. Now the firm produces units with an average cost of E and the firm has a profit of £ Now the market price is £50. In the short run, the firm produces units and the profit at this quantity of output is E In the short run, the firm produces zero if the market price is below £ In the long run, the firm will shut down if the market price is below E

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The above diagram depicts that At a price of 40 the ... View the full answer