The long-run average costs at the efficient scale of production for 6 firms in a market are given below.
FirmLRACminA10B15C13D18E17F12
The market price fell from Rs 20 to Rs 15. As a result ________
The long-run average costs at the efficient scale of production for 6 firms in a market are given below.
FirmLRACminA10B15C13D18E17F12
The market price fell from Rs 20 to Rs 15. As a result ________
The correct option is A the market supply curve shifts towards the left
When the market price falls from Rs 20 to Rs 15, firms D and E exit the market as the long run exits condition is met. As a result, the market supply curve shifts towards the left.
Note: We discussed that supply curve doesn't shift when price changes. This is true only in cases where there are a large number of sellers and their cost curves are similar. In most real markets with perfect competition, this is usually the case. The entry or exit of a few sellers does not have a marked impact on the supply curve.
the market supply curve shifts towards the left
When the market price falls from Rs 20 to Rs 15, firms D and E exit the market as the long run exits condition is met. As a result, the market supply curve shifts towards the left.
Note: We discussed that supply curve doesn't shift when price changes. This is true only in cases where there are a large number of sellers and their cost curves are similar. In most real markets with perfect competition, this is usually the case. The entry or exit of a few sellers does not have a marked impact on the supply curve.
