Using the graphs Which of the folowing sements is e O A The

Using the graphs. Which of the folowing sements is e O A. The rm will produce 30 thousands pounds of in the sho n andmro the n

Solution

Answer is A. The firm wil produce 30 thousands pounds of apples and earn economic profits. In the long run it will break even. Explanation: The firm will produce wher MC=MR i.e. 30 thousands pounds. Here the market price is more than ATC hence the firm will earn economic profits in the short run. In the long run, the new firms enter the indutry and will force the existing firm to be at break even.