The following graph shows the long-run average cost curve for a firm in a perfectly competitive industry. Draw a set of short-run cost curves consistent with output QE and use them to explain
a. Why the only output that a competitive firm will produce in the long run is QE
b. Why it will be a profit-maximizing decision to produce more than QE in the short run if the price exceeds PE

Transcribed Image Text:

LATC P B QE