2. Suppose that the market for black sweaters is a competitive market. The following graph...
Question:
Suppose that the market for black sweaters is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. In the short run at a market price of $15 per sweater, this firm will choose to produce _____ sweaters. What is the firms economic profit or loss?
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Economic Profit in Competition
Economic profit in competition occurs at the price where the marginal cost is greater than the average total cost. Firms in competition are price takers and the market price that is controlled by the rest of the industry determines their output. Perfectly competitive firms produce where price is equal to marginal cost.
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View this answerAt a market price of $15 per sweater the firm producers 8,000 sweaters. The market price of the sweater at the marginal cost curve is below the ATC...
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