Mc 25 8 10 12 1 1 points Using the graph above what is the

Mc ??? 25 8 10 12 1. (1 points) Using the graph above, what is the profit maximizing or loss minimizing output and price? 2. (1 point)Using the graph above, what is the profit or loss at the profit maximizing or loss minimizing point? 3. (2 points) What would happen in this market in the long ?n Be sure to explain in detail what happens in the market and the firm, what would be the long ?n price, and output. 4. (2 Points) How, if in the long run there is zero economic profit, do producers stay in business? (think about the difference between economic and accounting costs and the implications of this.)

Solution

Q1. Equilibrium output is 10. As the point at which the marginal revenue and marginal cost cuve meet and MC curve cuts MR curve from below. Q2. At equilirbum point, price= 25 and ATC is 15, therefore, there is a profit per unit of $ 10 per unit. At quanitty is 10. Therefore, the total profit eanred is $100 (i.e. 10 *10) Q3. As the firms are earning economic profits. It will endure another firms to enter the market, which will increasse the supply of the industry as cmpared to demand, resulting in the lowering of prices. As a result of this, theh frims in the industry will be able to earn zero economic profits. The Long run price will be $10 and output of each firm is 8 unitts Q4. Yes, the ffirm will be able to earn normal profits or zro economic profits. The firm will continue to run in the long run as it will be able to recover all explicit and implicit cost of the business. This includes the cost of self owned assets employed in the business by the owner.