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endah87 endah87
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A year ago

Consider the following cost curves for two perfectly competitive firms, Firm A and Firm B.

Short description: Two graphs labelled firm A and firm B. Long description: The first graph represents firm A. It shows a horizontal line at P subscript 0. Two wide U-shaped curves above the line represent ATC and AVC. A concave up increasing curve represents MC. MC and AVC intersect at (q subscript 0, P subscript 0). MC and ATC intersect at (q subscript 1, above P subscript 0). The second graph represents firm B. It shows a horizontal line at P subscript 0. Two wide U-shaped curves below the line represent ATC and AVC. A concave up increasing curve represents MC. MC and AVC intersect at (q subscript 2, below P subscript 0). MC and ATC intersect at (q subscript 1, below P subscript 0). MC and horizontal line intersect at (q subscript 0, P subscript 0). ATC intersects the horizontal line at two points. AVC intersects the horizontal line at a point.

FIGURE 9-4

Refer to Figure 9-4. Firms A and B are in the same industry. Choose the statement that best describes the situation facing the two firms.



▸ Firm A is suffering losses and will be shut down immediately; Firm B will be shut down if the price falls any further.

▸ Firm A is making losses but remains producing as long as price falls no further; Firm B is producing at lower cost and is earning economic profits.

▸ Firm A and Firm B have different cost structures and should therefore each charge a different profit-maximizing price.

▸ Firm A and Firm B are both suffering economic losses and will soon exit the industry.

▸ Firm A and Firm B are both earning positive economic profits; new firms will likely enter the industry.
Textbook 
Microeconomics

Microeconomics


Edition: 17th
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LaceyCGibsonLaceyCGibson
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endah87 Author
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A year ago
Brilliant ツ
halyna
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Yesterday
Thanks for your help!!
djeghri
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2 hours ago
Thank you, thank you, thank you!
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