Suppose a perfectly competitive firm faces the following situation: P = $9, outp
ID: 1109289 • Letter: S
Question
Suppose a perfectly competitive firm faces the following situation: P = $9, output = 4,000, ATC = $8, AVC = $6, and MC = $9. How can someone determine whether this firm's market is in a long-run equilibrium? It is not in equilibrium because MC = AVC = P = ATC at long-run equilibrium. It is in equilibrium because MC = P = AVC = ATC at long-run equilibrium. It is in equilibrium because MC = P = MR = SRATC at long-run equilibrium. It is not in equilibrium because MC = ATC = MR = P at long-run equilibrium. Suppose a perfectly competitive firm faces the following situation: P = $9, output = 4,000, ATC = $8, AVC = $6, and MC = $9. How can someone determine whether this firm's market is allocatively efficient? The firm is not allocatively efficient because P is not equal to MC. The firm is allocatively efficient because P = ATC. The firm is allocatively efficient because P = MC. The firm is not allocatively efficient because ATC is not equal to MC. Suppose a perfectly competitive firm is in the following situation: P = $8, output = 4,000, ATC = $8, AVC = $6, and MC = $8. Which statement accurately describes the firm's and the market's situation? The firm incurs a normal profit; the market is in a long-run equilibrium. The firm incurs economic profits; the market is in a long-run equilibrium. The firm incurs losses; the market is in a short-run equilibrium. The firm incurs economic profits; the market is in a short-run equilibrium. Suppose a perfectly competitive firm is in the following situation: P = $9, output = 4,000, ATC = $8, AVC = $6, and MC = $9. Which statement accurately describes the firm's and the market's situation? The firm incurs economic profits; the market is in a long-run equilibrium. The firm incurs economic profits; the market is in a short-run equilibrium. The firm incurs a normal profit; the market is in a long-run equilibrium. The firm incurs losses; the market is in a short-run equilibrium. Suppose a perfectly competitive firm faces the following situation: P = $9, output = 4,000, ATC = $8, AVC = $6, and MC = $9. How can someone determine whether this firm's market is in a long-run equilibrium? It is not in equilibrium because MC = AVC = P = ATC at long-run equilibrium. It is in equilibrium because MC = P = AVC = ATC at long-run equilibrium. It is in equilibrium because MC = P = MR = SRATC at long-run equilibrium. It is not in equilibrium because MC = ATC = MR = P at long-run equilibrium.Explanation / Answer
(Question 1) Correct option is (4)
In long run equilibrium, P = MR = MC = ATC. Though P = MR = MC = $9, ATC = $8, so it is not a long run equilibrium.
(Question 2) Correct option is (3)
Allocative efficiency is achieved when P = MC, which holds true in this case as P = MC = $9.
(Question 3) Correct option is (1)
In long run equilibrium, P = MC = ATC (which holds true here) and firms earn only normal profit (Since P = ATC).
(Question 4) Correct option is (2)
There is short run equilibrium when P = MC (which holds true here), and economic profit is earned when P > ATC (which holds true in this case).
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