Refer to the graph below, which shows costs for a perfectly competitive company. Use this...
Question:
Refer to the graph below, which shows costs for a perfectly competitive company. Use this information to answer the following question. Assume that the market price is set in turn at the following three different prices: $4; $2 and $1. How many units should the firm sell at each of these prices and what is the profit at that level of output? Explain your answers briefly.
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Determining Short and Long-run Equilibrium for a Perfectly Competitive Firm
Over the production cycle, the short-run differs from the long-run because fixed costs, such as costs of buildings and specialized equipment, cannot be varied in the short-run. Because of this, the optimal strategy for a perfectly competitive firm may differ over the two time horizons.
Answer and Explanation: 1
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View this answerThe marginal cost curve (MC) above average variable cost (AVC) is the short-run supply curve for a perfectly competitive firm. At a price of $4, the...
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Using the Total Cost Curve to Make Production Decisions in the Short-Run
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Chapter 4 / Lesson 7
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Producers use something called the total cost curve in order to make decisions about their products in the short-run. Explore what total cost and the total cost curve are and how they help producers make decisions in the short-run.
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