Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. Price ($/unit) 125 25 20 15 10 10 5 Entire Market Single Representative Firm 25 S1 MC S2 20 15 S3 10 10 5 D 0 ° 200 250 300 350 400 450 Quantity (Number of Units) ATC AVC 10 15 20 25 30 35 40 45 50 Quantity (Number of Units) If the market supply curve is given by S3, then in the long run firms will Multiple Choice exit the market, leading the market supply curve to shift back to S2. exit the market, leading the market supply curve to shift back to S1. enter the market, leading the market supply curve to shift back to S2. neither enter nor exit the market, so the market supply curve will remain at S3.
Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. Price ($/unit) 125 25 20 15 10 10 5 Entire Market Single Representative Firm 25 S1 MC S2 20 15 S3 10 10 5 D 0 ° 200 250 300 350 400 450 Quantity (Number of Units) ATC AVC 10 15 20 25 30 35 40 45 50 Quantity (Number of Units) If the market supply curve is given by S3, then in the long run firms will Multiple Choice exit the market, leading the market supply curve to shift back to S2. exit the market, leading the market supply curve to shift back to S1. enter the market, leading the market supply curve to shift back to S2. neither enter nor exit the market, so the market supply curve will remain at S3.
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter22: Perfect Competition
Section22.1: The Theory Of Perfect Competition
Problem 4ST
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