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I marginal revenue ii output iii economic profits b

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Unformatted text preview: petitive industry. (i) Marginal revenue (ii) Output (iii) Economic profits (b) Using the information in (a), draw correctly labeled side-by-side graphs for the industry and a typical firm. (i) Given the existence of economic profits of the typical firm, show on the graphs how the industry adjusts in the long run and explain the process that leads to the long-run equilibrium. (ii) Show on the graphs each of the following for the industry and for the typical firm in long-run equilibrium. • Price • Output (c) Now assume that the government sets a price that is less than the equilibrium price but greater than average variable cost. Indicate how each of the following will change for the typical firm and explain why the change occurs. (i) Marginal revenue (ii) Level of output (iii) Short-run total cost (iv) Short-run total revenue Copyright © 2001 by College Entrance Examination Board. All rights reserved. Advanced Placement Program and AP are registered trademarks of the College Entrance Examination Board. GO ON TO THE NEXT PAGE. 2 2001 AP® MICROECONOMICS FREE-RESPONSE QUESTIONS 2. Assume that product X is produced in a perfectly competitive industry and that product X yields costs to individuals who are neither consumers nor producers of product X. (a) Using one correctly labeled graph, show the industry output and price under each of...
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