Long run in the pc

Question 1

The PC firm making abnormal profits in the short run

Answer 1

Will cause other firms to enter the industry since there are no barriers to entry, this would result in an increase in market supply and a decrease in the price of the good from P–>P1

Question 2

Since PC firms are price takers

Answer 2

the firm will take new price set by the market P1, hence the D=MR=AR curve shifts to D1=MR1=AR1 until normal profits are being made

Question 3

The PC curve making losses in the short run

Answer 3

Will cause other firms to exit the industry since there are no barries to exit this would result in a decrease in the market supply of the good and an increase in the price of the good

Question 4

Since PC firms are price takes (losses)

Answer 4

The firm will take the new price set by the market so the curve will shift upwards until normal profits are being made in the long run

Question 5

The marginal cost curve

Answer 5

Gives the price the producer would be willing to accept for different quantities of the g/s he produces, the marginal cost curve is the supply curve of the firm that operates under perfect competition