Figure 14-7

-Refer to Figure 14-7. Assume that the market starts in equilibrium at point W in graph (b) and that graph (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D₀ to D₁. Which of the following statements is correct?

Question

Figure 14-7

-Refer to Figure 14-7. Assume that the market starts in equilibrium at point W in graph (b) and that graph (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D₀ to D₁. Which of the following statements is correct?

Quizplus · Accepted Answer

Points W and Z represent long-run equilibria because in the long run, firms will enter or exit the market until economic profits are zero, which occurs at points where the demand curve is tangent to the average total cost curve.

Figure 14-7 ​

Figure 14-7