On a graph for a representative firm in a perfectly competitive industry, depict the three cost curves AVC, ATC, and MC (assume typical U-shaped cost curves). Now assume the market price, P, is such that it intersects the upward-sloping portion of MC above ATC. Graphically depict the short-run equilibrium q (representative firm's output) and π (representative firm's profit) under this price scenario. 2) Given the situation you graphically depicted in #1, please state the level of economic profits (positive, zero, negative) of this representative firm and explain why this is the case.

On a graph for a representative firm in a perfectly competitive industry, depict the three cost curves AVC, ATC, and MC (assume typical U-shaped cost curves). Now assume the market price, P, is such that it intersects the upward-sloping portion of MC above ATC. Graphically depict the short-run equilibrium q (representative firm's output) and π (representative firm's profit) under this price scenario. 2) Given the situation you graphically depicted in #1, please state the level of economic profits (positive, zero, negative) of this representative firm and explain why this is the case.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter8: An Introduction To Perfect Competition

Section: Chapter Questions

Problem 12PAE

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