Exhibit 8.11

-Refer to Exhibit 8.11,which shows a perfectly competitive firm in an increasing-cost industry.Suppose market demand increases to d_b.At point of b,in the short-run,the firm _____

Question

Exhibit 8.11 -Refer to Exhibit 8.11,which shows a perfectly competitive firm in an increasing-cost industry.Suppose market demand increases to d_b.At point of b,in the short-run,the firm _____

Quizplus · Accepted Answer

At point b, the market price (P1) is above the firm's average variable cost (AVC1). Therefore, in the short-run, the firm will produce at point b, where MR=MC1. At this point, the firm is earning a positive economic profit since price (P1) is above both the average variable cost (AVC1) and the average total cost (ATC1).

Exhibit 8.11 -Refer to Exhibit 8.11,which Shows a Perfectly Competitive Firm in Perfectly