Price (dollars per pound) S Market price 2 10 20 30 Supply of apples 40 Demand for apples 50 Quantity (thousands of pounds) Price and cost (dollars per pound) Market price 20 30 40 ATC D-MA 50 Quantity (thousands of pounds) Given the two diagrams, the left showing the market supply and demand, the right showing a typical individual firm in this competitive market, what would you expect will happen over time? Existing firms will increase output with positive profits. Existing firms will exit the market and average profits by market firms will remain positive. New firms will enter the market and average profits by market firms will remain positive. Existing firms will exit the market and average profits by market firms will be zero in the long run. New firms will enter the market and average profits by market firms will be zero in the long run.

Price (dollars per pound) S Market price 2 10 20 30 Supply of apples 40 Demand for apples 50 Quantity (thousands of pounds) Price and cost (dollars per pound) Market price 20 30 40 ATC D-MA 50 Quantity (thousands of pounds) Given the two diagrams, the left showing the market supply and demand, the right showing a typical individual firm in this competitive market, what would you expect will happen over time? Existing firms will increase output with positive profits. Existing firms will exit the market and average profits by market firms will remain positive. New firms will enter the market and average profits by market firms will remain positive. Existing firms will exit the market and average profits by market firms will be zero in the long run. New firms will enter the market and average profits by market firms will be zero in the long run.

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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