Question

The market price is determined by: marginal revenue and marginal cost. marginal revenue and average total cost. market demand and market supply. b. To determine the firm's profit-maximizing output, the firm will set its marginal revenue equal to: market price. marginal cost. average variable cost. average total cost. c. A firm is making an economic profit if, at the profit-maximizing output, the market price is: greater than average variable cost. greater than average total cost. less than average total cost. less than average variable cost. d. If firms are earning economic profits, the market price will: increase as new firms enter the market. fall as new firms enter the market. increase as some existing firms exit the market. fall as some existing firms exit the market.

Answer 1

a. market demand and market supply

b. marginal cost.

c.greater than average total cost

fall as new firms enter the market.

Step-by-step explanation:

Equilibrium price is determined where the demand curve intersects the supply curve.

In a competitive market, market price is usually set by the market forces.

A firm maximises profit where marginal cost = marginal revenue.

A firm is making economic profit where price is greater than average total cost. When firms are making economic profit in the short rub , firms enter into the industry in the long run, this drives prices down and wipes out the economic profit. Firms can only enter into industry easily if there are no or low barriers to entry. E.g. in a competitive market.

Therefore, in the long run, industries with low or no barriers to entry or exit of firms make normal profit.

In the short run, a firm should shut down if price is less than average variable cost.

I hope my answer helps you.