4 The black lines on the graph show the unit cost curves of a representative firm…

4 The black lines on the graph show the unit cost curves of a representative firm in a constant cost competitive industry The black supply and demand curve shows the market for the good in equilibrium at a price P Suppose the price of labor drops. Unit Cost Curves of a Representative Firm $per unit Market Supply and Demand MC MC2 ATC, 100 Ems IC Demand Select all that apply After the price of labor drops, at the price P1 the firm will continue to produce q1 because at that level of output the firm is making a profit. After the price of labor drops, at the price P1 the firm will increase output to q2 because given the price of labor drops that is the quantity where ATC is minimized. After the price of labor drops, at the price P1 the firm will increase output to q2 because given the price of labor drops that is the quantity where price equals MC The shaded blue area is the profit the firm will make after the price of labor drops and after the firm has adjusted its output level to the new lower unit costs. In the short run after the price of labor drops, each firm in the industry will produce more output at any given price. This will shift the Short Industry Supply Curve from black to blue. In the short run after the price of labor drops, each firm in the industry will produce more output at any given price. This will shift the Short Industry Supply Curve from black to green. In the short run after the price of labor drops, each firm in the industry will earn a profit. In the short run after the price of labor drops, each firm in the industry will break even. In the short run after the price of labor drops, each firm in the industry will lose money. In the long run, new firms will enter the industry shifting the Short Run Supply Curve from blue to green. In the long run, new firms will enter the industry shifting the Short Run Supply Curve from black to green. In the long run, new firms will enter the industry shifting the Short Run Supply Curve from black to green. In the long run firms will continue to enter the industry, shifting the demand curve to the left until the price has fallen to the minimum of ATC1 In the long run firms will continue to enter the industry, shifting the demand curve to the right until the price has fallen to the minimum of ATC1. In the long run firms will continue to enter the industry, shifting the demand curve to the left until the price has fallen to the minimum of ATC2. In the long run firms will continue to enter the industry, shifting the demand curve to the right until the price has fallen to the minimum of ATC2 In the short run, existing firms benefit from the drop in the price of labor because their profits increase. In the short run, existing firms don’t benefit from the drop in the price of labor because their profits stay the same. In the long run, existing firms benefit from the drop in the price of labor because their profits increase In the long run, existing firms don’t benefit from the drop in the price of labor because their profits stay the same. In the short run, consumers don’t benefit from the drop in the price of labor because businesses capture all the benefits as increased profits. In the short run, consumers benefit from the drop in the price of labor because the price of the good falls. In the short run, consumers don’t benefit from the drop in the price of labor because price remains the same. right until the price has fallen to the minimum of ATC2. In the short run, existing firms benefit from the drop in the price of labor because their profits increase. In the short run, existing firms don’t benefit from the drop in the price of labor because their profits stay the same In the long run, existing firms benefit from the drop in the price of labor because their profits increase. In the long run, existing firms don’t benefit from the drop in the price of labor because their profits stay the same. In the short run, consumers don’t benefit from the drop in the price of labor because businesses capture all the benefits as increased profits. In the short run, consumers benefit from the drop in the price of labor because the price of the good falls. In the short run, consumers don’t benefit from the drop in the price of labor because price remains the same. In the long run, consumers don’t benefit from the drop in the price of labor because businesses capture all the benefits as increased profits. In the long run, consumers benefit from the drop in the price of labor because the price of the good falls. In the short run, consumers don’t benefit from the drop in the price of labor because price remains the same.