2012.04.30 - ECON1101, Week 9 Lecture Notes

9 12 how firms respond to profits and losses figure

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Unformatted text preview: ofit of $104 000 per year (b). 9-12 HOW FIRMS RESPOND TO PROFITS AND LOSSES Figure 9.3 The effect of entry of new growers on price and economic profit in the apple market At the original price of $2 per kilogram, existing apple growers earned an economic profit, prompting new apple growers to enter. With entry, supply shifts right (from S to S´ in (a)) and equilibrium price falls, as does economic profit (b). 9-13 HOW FIRMS RESPOND TO PROFITS AND LOSSES Figure 9.4 Equilibrium when entry of new growers ceases in the apple market Growers will cease to enter once price falls to the minimum value of ATC. At that point all orchards earn an economic profit o...
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