3. Explain why a perfectly competitive firm will shut down in the short runif price is lower than average variable cost but will continue to produceifprice is below average total cost but above average variable cost.4. You read in a business magazine that farmers are reaping high profits.With the theory of perfect competition in mind, what do you expect tohappen over time (in the long run) to each of the following?a. The prices of agricultural productsb. The profits of farmersc. The equilibrium output in agricultural marketsd. The number of farms

3. Explain why a perfectly competitive firm will shut down in the short run if price is lower than average variable cost but will continue to produce if price is below average total cost but above average variable cost.

3. Explain why a perfectly competitive firm will shut down in the short run if price is lower than average variable cost but will continue to produce if price is below average total cost but above average variable cost.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Firms In Competitive Markets

Section: Chapter Questions

Problem 4CQQ

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Question

3. Explain why a perfectly competitive firm will shut down in the short run
if price is lower than average variable cost but will continue to produce
if
price is below average total cost but above average variable cost.
4. You read in a business magazine that farmers are reaping high profits.
With the theory of perfect competition in mind, what do you expect to
happen over time (in the long run) to each of the following?
a. The prices of agricultural products
b. The profits of farmers
c. The equilibrium output in agricultural markets
d. The number of farms

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