If the short-run supply curve and the demand curve intersect below the long-run supply curve,firms will experience ________ economic profits,meaning the price is ________ the minimum point on the average total cost curve.
A) positive; above
B) positive; below
C) negative; above
D) negative; below
E) zero; above

Question

Quizplus · Accepted Answer

If the short-run supply curve and the demand curve intersect below the long-run supply curve, it indicates that the industry is not in equilibrium in the long run. This means that there is excess capacity in the industry and firms will experience negative economic profits. The price will be below the minimum point on the average total cost curve, which is the break-even point for the firm, making it unprofitable for the firm to operate in the long run.

If the Short-Run Supply Curve and the Demand Curve Intersect