Figure 9-13

-Refer to Figure 9-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.If the firm represented in the diagram continues to stay in business,in the long-run equilibrium

Question

Figure 9-13
 
-Refer to Figure 9-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.If the firm represented in the diagram continues to stay in business,in the long-run equilibrium

Quizplus · Accepted Answer

In the long-run equilibrium, the firm will increase its output to the point where P = ATC. This means that the firm will expand its output to Q2 and face a price of P2. This is because at Q0 and Q1, the price is below the ATC, indicating that the firm is making losses. At Q2, the price is equal to the ATC, indicating that the firm is making normal profits. Therefore, the best choice is C.

Figure 9-13 -Refer to Figure 9-13.Suppose the Prevailing Price Is P₁ and Price