‘newer LESSON SM ACTIVITY 31. Key Graphing Perfect Competition “The loin ode eal operag in peel compete mae (a) lustrate each situation on the graph provided. (B) Label al curves in your answers. (©) Explain the reasoning for your graphs in each situation, coon al 1. Afimexgeseningeonoml itn the shor ni Bgens Cn. Short-Run Economic Profit MC= 2WR = SIndtey Firm Kpnacare pdast \ ewwnrt \ ye us wy, * a: \ yf \ we aro { cod EE & pane a 4 7 Zone [la we As aR ‘QUANTATY won Explanation: The firm will maximize profits where MR= MC and will enjoy profits because priceis above its ATC ure. Led That Gecblocks. Se Perc! Comp Bye PP arc perrrdage 6 too he ims) el ee CT Sq rnere COnpames CONE 6 Farewy Pra te Coot dos, Te {e.\ VE ATC. eecrige S wo Cobol Resmome Loss ) aa Sent com@nd Heoo ben? less Sey! reany, Ofte VEE LO . see) a2 Are Gas Eas /Answer LESSON 3m ACTIVITY 31. Key 2, A fiem operating with an economic losin the short run, BB rigues12 Short-Run Econcmic Loss Industry Los ‘QUANTITY “QUANTITY Explanation: The frm will minimize losses where MR = MC. At this level of output the firm ie cov ‘ring ll ofits vaable costs and a portion ofits fed costs. In his example, the frm will inionice its losses the short run by continuing o produce because prices above its AVC curve 2. Afirmina csi BB riguresia Clasic Shutdown Position Indastry Finn t-down position i the shor run, mo 8 4 ‘ATC g| i &| ‘AVC PeMR D ‘QUANTITY QUANTITY Explanation; Price is below the AVC curve, and the fio will minimize ts losses by closing down. ovwever,it willl experience fsed costs, ee ‘oud cs ani © Gl fn to a 7_ ae a vesson's macmvnya1 oy 4, Long-run equilibrium fora firm and industry BB ripest Long-Run Equilibrium Indy Fim we 8 —_ Me eq a pawn ao SonNTTY Explanation: Thefivm wil bein longue equilibrium where MC = minimum ATC = MR. The frm is hreaking even; here ino incentive or other firms to enter the market 5, Tusrate how economic profits wil disappear in the long run EB rigurests From Short-Run Profit to Long-Run Equilbrium Industry Firm c me — PMR Py=MR, . AVC “UANTTY “Explanation: Reports of firms making an economic profit wil cause other firms to enter the market, ‘This wl sf she supply curve tothe right, causing prices to drop and elinsinating profits The firm wil en be in lng equ at the break-even pot.as By, co Moket (7-4): Oe ) Eve S, ec G ' f Qs Q © Bald MC, *se0esh" GS SD cross o thee Obed Archest pane bre 2) Bah Ame SE aie Ooo Pe © Lebel /THle a Move Su yay (ae teil occurs AIG ® Vu del eves thyy