Explain What Will Happen in Each of the Following Scenarios

question 101

Essay

Explain what will happen in each of the following scenarios in a long run constant cost competitive industry.
a. The market price is $50, and firms are earning positive profits.
b. The market price is $25, and firms are earning zero profits.
c. The market price is $15, and firms are earning negative profits.

Interpret the implications of expenditure changes on isocost positioning.

Calculate total costs given input prices and isocost information.

Distinguish between the slopes of different isocost lines and their significance.

Determine the effects of input price changes on the allocation of firm resources.

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