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Author Question: In the above figure, the long-run average cost curve exhibits diseconomies of scale A) between 5 ... (Read 42 times)

Collmarie

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on: Jun 29, 2018
In the above figure, the long-run average cost curve exhibits diseconomies of scale
 
  A) between 5 and 10 units per hour.
  B) between 10 and 20 units per hour.
  C) between 20 and 25 units per hour.
  D) along the entire curve.

Question 2

In the long run, perfectly competitive firms cannot make an economic profit. Why?
 
  What will be an ideal response?


TDubDCFL

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Reply #1 on: Jun 29, 2018
Answer to Question 1

C

Answer to Question 2

An economic profit attracts entry by new firms. As new firms enter the market, the market supply increases and the market supply curve shifts rightward. The increase in supply decreases the price. And, as the price falls, the economic profit is eliminated.


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