I just need help with number 8 Use the graphs below to answer quLl Individual Fi
ID: 1140653 • Letter: I
Question
I just need help with number 8
Use the graphs below to answer quLl Individual Firm Market Price Price MC ATC D2 80 100 Quantity 160 200 Quantity (millions) If the current market price is $5: a. this market is in long-run equilibrium as long as the individual firm is producing 7. b. economic profit is positive, so more firms will enter this industry in the c. economic profit is negative, so firms will exit this industry in the long run, d. there is not enough information provided in the graphs to reach any conclusions. and selling 80 units of output. long run, causing market supply to increase. causing market supply to decrease. An increase in market demand from Di to D2 causes: a. MR and MC to increase from $5 to $7. b. MR to increase to $7, but no change in MC. c. MC to increase to $7, but no change in MR. d. no change in either MR or MC. 8.Explanation / Answer
This is a perfect market condition, in this market the firm can sell as many products as they want at the given price i.e. every product will be sold at the market price. so MR will be equal to the price.
In a perfect market condition the price and marginal cost are equal, so we get P= MR= MC =AR.
The answer is "A". as the price increased the MR and MC will also increase to $7.