MYECONLAB+ETEXT+KNAPP 104 STUDENT PACKET
MYECONLAB+ETEXT+KNAPP 104 STUDENT PACKET
6th Edition
ISBN: 9781323477816
Author: HUBBARD/KNAPP
Publisher: PEARSON C
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Chapter 12, Problem 12.4.4PA
To determine

Whether the firm will produce in short run or shut down.

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If firms in a competitive industry incur an economic profit, what happens to supply, price, output, and economic profit in the long run? Explain
. The market for fertilizer is perfectly competitive. Firms in the market are producing output, but they are currently making economic losses.  a) How does the price of fertilizer compare to the average total cost, the average variable cost, and the marginal cost of producing fertilizer?b) Draw a graph, illustrating the present situation for the typical firm that is making losses.c) Assuming there is no change in demand or the firm's cost curves, explain what will happen in the long run to the price of fertilizer, marginal cost, average total cost, the quantity supplied by each firm, and the total quantity supplied to the market
Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Carefully explain your answer.  2. Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market where firms are experiencing economic losses. Using your graph, determine whether this firm will shut down in the short run, or choose to remain in the market.
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