Figure 14-8

-Refer to Figure 14-8.If the figure in panel (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market,what does the figure in panel (b) most likely reflect

Question

Figure 14-8
 
-Refer to Figure 14-8.If the figure in panel (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market,what does the figure in panel (b) most likely reflect

Quizplus · Accepted Answer

Panel (b) shows the long-run market supply curve in a perfectly competitive market. In the long run, firms can enter or exit the market freely, leading to a situation where all firms earn zero economic profits. This means that the price that buyers are willing to pay (as shown by the demand curve) is equal to the minimum price that firms are willing to accept (as shown by the long-run market supply curve). Panel (b) reflects this idea by showing that there is only one market price in the long run, which is determined by the intersection of the demand and long-run market supply curves.

Figure 14-8 -Refer to Figure 14-8.If the Figure in Panel (A) Reflects