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The following graphs show the cost curves faced by a typical firm, the demand for fertilizer, and
possible price and supply curves.
FirmPrice and CostsQuantityMCATCAVCP1P2
If firms in the market are producing output but are currently making economic losses,
illustrates the present situation for the typical firm in the market, and
corresponding supply curve.
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If firms in the market are producing output but are currently making economic losses, the price must
be between average total cost and average variable cost, so
P2 must illustrate the present situation
for the typical firm in this market. See Sections: The Marginal-Cost Curve and the Firm's Supply
Decision; and The Firm's Short-Run Decision to Shut Down.
Assuming there is no change in either demand or the firm's cost curves, which of the following
statements is true about what will happen in the long run?
Check all that apply.