In the competitive market for a particular good there are two types of producers: Type A and Type B. Type A producers use a better production technology than Type B producers, so Type A's average cost curve lower than Type B's for any output level. Both types have upward-sloping marginal cost curves. Assume that the market demand is large enough so that both types of firms produce in the short-run (when the number of firms is fixed) and in the long-run (when the number of firms can change). Which of the following statements is correct regarding the short-run and the long-run equilibria of this competitive market? O a. In the long-run equilibrium, the marginal Type B firm produces where price equals its average cost and makes an economic rent. O b. All firms produce less in the long-run equilibrium than in the short-run equilibrium. O c. In the long-run equilibrium, MC = AC for Type A firms and MC = AC for Type B firms. O d. In the short-run equilibrium, Type B firms produce at where the price equals their marginal cost (MC), while Type A firms produce at where the price is above its MC.

In the competitive market for a particular good there are two types of producers: Type A and Type B. Type A producers use a better production technology than Type B producers, so Type A's average cost curve lower than Type B's for any output level. Both types have upward-sloping marginal cost curves. Assume that the market demand is large enough so that both types of firms produce in the short-run (when the number of firms is fixed) and in the long-run (when the number of firms can change). Which of the following statements is correct regarding the short-run and the long-run equilibria of this competitive market? O a. In the long-run equilibrium, the marginal Type B firm produces where price equals its average cost and makes an economic rent. O b. All firms produce less in the long-run equilibrium than in the short-run equilibrium. O c. In the long-run equilibrium, MC = AC for Type A firms and MC = AC for Type B firms. O d. In the short-run equilibrium, Type B firms produce at where the price equals their marginal cost (MC), while Type A firms produce at where the price is above its MC.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.9P

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