Consider a profit maximizing firm operating in a perfectly competitive market with the cost structure illustrated by the above graph. Based on the above graph, identify whether each of the following would be true or false and briefly explain your reasoning. A. The break-even price for this firm in the short-run would be $2. B. If the short-run market price is $2.50, this firm would earn profits equal to -$135. C. If the short-run market price is greater than $2, free entry and exit would cause other firms to continue to enter the industry in the short-run until the market price falls to $2 per unit.

Consider a profit maximizing firm operating in a perfectly competitive market with the cost structure illustrated by the above graph. Based on the above graph, identify whether each of the following would be true or false and briefly explain your reasoning. A. The break-even price for this firm in the short-run would be $2. B. If the short-run market price is $2.50, this firm would earn profits equal to -$135. C. If the short-run market price is greater than $2, free entry and exit would cause other firms to continue to enter the industry in the short-run until the market price falls to $2 per unit.

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 1PA

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