Based on the following table: Output Price($) Total Costs($) 0 10 17 1 10 25 2 1

Question

Based on the following table:


Output     Price($)     Total Costs($)
0             10              17
1             10              25
2             10              31
3             10              35
4             10             40
5             10              50
6             10              65
7             10              95
8             10             135
9             10             195
10           10            275

What will happen in the long run?

A. The firm is earning losses so the market price will rise in the long run because firms will exit the market, shifting the market supply to the left, which causes market price to rise.

B. The firm is earning a profit so the market price will fall in the long run because firms will enter the market, shifting the market supply to the right, which causes market price to fall.

C. The firm is earning a profit so the market price will rise in the long run because firms will exit the market, shifting the market supply to the left, which causes market price to rise.

D. The firm is earning losses so the market price will fall in the long run because firms will enter the market, shifting the market supply to the right, which causes market price to fall.

A. The firm is earning losses so the market price will rise in the long run because firms will exit the market, shifting the market supply to the left, which causes market price to rise.

B. The firm is earning a profit so the market price will fall in the long run because firms will enter the market, shifting the market supply to the right, which causes market price to fall.

C. The firm is earning a profit so the market price will rise in the long run because firms will exit the market, shifting the market supply to the left, which causes market price to rise.

D. The firm is earning losses so the market price will fall in the long run because firms will enter the market, shifting the market supply to the right, which causes market price to fall.

Explanation / Answer

Option A is correct, firms are incurring losses, so in long run prices will increase.

see table for clarification

Output Prices Total Cost Total Revenue Profit 0 10 17 0 -17 1 10 25 10 -15 2 10 31 20 -11 3 10 35 30 -5 4 10 40 40 0 5 10 50 50 0 6 10 65 60 -5 7 10 95 70 -25 8 10 135 80 -55 9 10 195 90 -105 10 10 275 100 -175

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