Asked by Jasmine Sarmientos on May 07, 2024
Verified
Refer to Figure 8.7.1 above. When market price equals $40, we can expect:
A) exit of firms and a decrease in market price.
B) entry of firms and a decrease in market price.
C) exit of firms and an increase in market price.
D) entry of firms and an increase in market price.
Market Price
The price of a commodity when sold in a given market, determined by supply and demand.
Entry of Firms
Refers to the process by which new companies enter an industry, increasing competition and potentially leading to lower prices and innovation.
Market Price
The present cost at which a service or asset is available for purchase or sale in a specific market.
- Investigate how external elements such as taxes affect supply and the movement within markets.
Verified Answer
ZK
Zybrea KnightMay 08, 2024
Final Answer :
B
Explanation :
At a market price of $40, the average cost curve of all firms is intersected, indicating normal profits. This is the minimum entry point for new firms. Therefore, we can expect entry of firms and a decrease in market price due to the increase in supply.
Learning Objectives
- Investigate how external elements such as taxes affect supply and the movement within markets.