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aryaelfkind aryaelfkind
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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. If Firm B is producing at output level q2, and selling its output at p0, then Firm B should



▸ expand output to q0 so that profits will be maximized.

▸ raise the price above p0 to increase profits.

▸ shut down because at this price and output level the firm is suffering losses.

▸ expand output to q1 because profits are maximized when SRATC is at its minimum.

▸ remain at this output level because profits are maximized when SRAVC is at its minimum.
Textbook 
Microeconomics

Microeconomics


Edition: 17th
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nilabmirzadanilabmirzada
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aryaelfkind Author
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A year ago
Thanks
Zacellison
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Yesterday
I appreciate what you did here, answered it right Smiling Face with Open Mouth
jcarter
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2 hours ago
Good timing, thanks!
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