Figure 9-19 -Refer to Figure 9-19.The Figure Above Shows the Cost Curves

question 214

Essay

Figure 9-19

-Refer to Figure 9-19.The figure above shows the cost curves of a perfectly competitive firm in the coffee market.Use the graph in Figure 9-19 to answer the following questions.Assume the market price is $3 per pound.
a.What is the lowest price at which the coffee grower will supply output in the short run?
b.In the diagram draw the firm's demand curve (label this "MR" for marginal revenue).
c.What is the firm's profit-maximizing output?
d.Is the firm earning a profit or a loss? Identify the area in the graph that represents the firm's profit or loss.
e.Explain how entry or exit will occur in the market to ensure that firms will break even in the long run.

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