Question

the firm behaves optimally to maximize profit. use the rectangle drawing tool to shade in the firms economic profit or loss. properly label the object. carefully follow the instructions above, and only draw the required objects. in the long run, will new firms enter the market or will existing firms exit? in the long run, a. firms will neither enter nor exit due to barriers. b. existing firms will exit because the firm is currently experiencing losses. c. new firms will enter because the firm is currently making profit. d. new firms will enter because the firm is currently experiencing losses. e. new firms will enter because the average total cost of production is decreasing.

Explanation:

To determine long - run firm behavior, we analyze economic profit. If a firm makes an economic profit (price > average total cost, ATC, at the profit - maximizing quantity), new firms enter the market (as they are attracted by the profit). From the graph, the firm is currently making a profit (since price at the profit - maximizing quantity is above ATC). Option A is incorrect as there's no indication of barriers and the firm has profit. Option B is wrong because the firm is profitable, not experiencing losses. Option D is incorrect as the firm is not experiencing losses. Option E is wrong as the reason for new firms entering is profit, not a decreasing ATC. Option C states new firms will enter because the firm is currently making a profit, which matches the analysis.

Answer:

C. new firms will enter because the firm is currently making profit.