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Home Q & A Board Other Fields Homework Help Business Economics
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kmonette kmonette
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A year ago

Consider the following cost curves for Firm X, a perfectly competitive firm.

Short description: A graph plots quantity against dollars per unit. Long description: The horizontal axis represents quantity. The vertical axis represents dollars per unit. The graph plots five curves. A large U-shaped curve represents LRAC. It encloses two small U-shaped curves. The first curve on the left represents SRATC subscript 1. The second curve at the center represents SRATC subscript 2. Two concave up increasing curves represent MC subscript 1 and MC subscript 2. MC subscript 1 and SRATC subscript 1 intersect at (Q subscript 1, P subscript 1). LRAC and MC subscript 1 intersect at a point. LRAC, MC subscript 2, and SRATC subscript 2 intersect at (Q subscript 2, P subscript 2).

FIGURE 9-8

Refer to Figure 9-8. Suppose Firm X is producing output Q2 and the market price is P2. Now suppose demand conditions change and price rises above P2. We could expect that



▸ Firm X will now earn long-run economic profits.

▸ Firm X can gain market share as the market expands.

▸ Firm X will no longer be a price taker.

▸ the higher costs facing firms will cause some firms to leave the industry, allowing Firm X to earn profits in the short run.

▸ the profit now being earned by existing firms will induce new firms to enter the industry.
Textbook 
Microeconomics

Microeconomics


Edition: 17th
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crazyali16crazyali16
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