Explain why each of the following statements is false. Be thorough yet concise in your answer. Consider a graph of typical cost curves for a firm.

Explain why each of the following statements is false. Be thorough yet concise in your answer.

1. Consider a graph of typical cost curves for a firm. As outputincreases, the distance between average total cost and average variable cost increases.

2. When perfectly competitive firms make aprofit, it encourages other firms to enter. Over thelong-run, this entry causes the market demand curve to shiftright, which increases marginal revenue for each firm. This entry continues until each firm is earning zero profit.

3. To maximizeprofit, a monopolist will produce and sell a quantity where MR= MC and then charge a price equal to MR.

Running head: COST FUNCTION 1 Cost FunctionStudent’s NameInstitution COST FUNCTION 2Question 1 As output increases the AVC decreases then increases because at first, the MC is less thanAVC…

 
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