Refer to the diagrams below. Assume a company is operating in the perfectly comp

Question

Refer to the diagrams below.

Assume a company is operating in the perfectly competitive industry and produces output q.

The following adjustments are expected in the long run:

Question 11 3 pts Refer to the diagrams below. ssume a company is operating in the perfectly competitive industry and produces output q he following adjustments are expected in the ong run: MC ATC AVC MR P O firms to leave the industry, market supply to rise and product price to fall. firms to enter the industry, market supply to rise and product price to fall. firms to leave the industry, market supply to fall and product price to rise O no change in the number of firms in this industry

Explanation / Answer

Option (3) is correct.

When output is q units (at intersection of Price and MC), the ATC curve lies above Price, indicating short run loss. This will cause some firms to exit the market, leading to lower market supply and a leftward shift of market supply curve, causing a rise in price.

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