Question

In: Economics

Please draw the graphs to show different profit-maximizing scenarios that a perfectly competitive firm will be...

Please draw the graphs to show different profit-maximizing scenarios that a perfectly competitive firm will be facing with different price levels. Shade the areas of profit or loss to support your arguments

A) The Firm is operating and earns a positive profit.

B) The Firm is operating and earns 0 profit.

C) The Firm is operating but earns negative profit.

D) The Firm is indifferent between operating and shutting down.

E) The Firm Shuts down.

Solutions

Expert Solution

A.Firm earns positive profits when P>AC.

B.Firm earns normal profits when P=AC

C.Firm earns loss when P<AC

D.Firm is indifferent between staying or leaving when P=AVC,at it may be able to cover losses in the long run.

E.Firm leave when P<AVC.It shuts down.

Rahul Sunny answered 2 years ago
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