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Tulip growing is a perfectly competitive industry and all tulip growers have the same cost curves

Economics

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Tulip growing is a perfectly competitive industry and all tulip growers have the same cost curves. The market price of tulips is $12 a bunch and each grower maximizes profit by producing 2,900 bunches a week. The average total cost of producing tulips is $20 a bunch. Minimum average variable cost is $9 a bunch, and the minimum average total cost is $12 a bunch.

1. In the short run, each grower is making an economic profit of $_ a week.

2. Because firms in the industry are _ some firms will _ the market in the long run. The number of tulip growers will _.

a) making an economic profit, enter, increase

b) making an economic profit, exist and some firms will enter, decrease or increase depending on the relative number of exiting and entering firms

c) incurring an economic loss, exit, decrease

d) incurring an economic loss, enter and some firms will exist, increase or decrease depending on the relative number of entering and exiting firms

e) making zero economic profit, shut down and exit, decrease