Consider Exhibit 14, which shows the graph of a
perfectly competitive firm in the short run.
a. If the firm’s demand curve is MR3, does the firm
earn an economic profit or incur a loss?
b. Which demand curve(s) indicates the firm incurs
a loss?
c. Which demand curve(s) indicates the firm would
shut down?
d. Identify the firm’s short-run supply curve.
286: Consider this statement: “The perfectly competitive
firm will sell all the quantity of output consumers
will buy at the prevailing market price.” Do you
agree or disagree? Explain your answer.
Suppose a perfectly competitive firm’s demand curve
is below its average total cost curve. Explain the
conditions under which a firm continues to produce
in the short run.