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D Question 24 5.68 pts MC ATC P AVC (1) Q (II) Q MC P MC PI ATC ATC P AVC AVC P (III) Q (IV Q Refer to the graphs above of perfectly competitive firms. Which of the following statements is incorrect or false? In graph (I1) economic profits for the firm is $0. Therefore, firms will not have an incentive to enter or exit the market. The firm and market are at a long-run equilibrium point In graph (III) the firm is earning an economic loss. However, the firm will continue to operate in the short-run because price is greater than average variable costs. Therefore, the firm is covering average variable costs and reducing the overall burden of total fixed costs. O In graph (1) the firm is enjoying positive economic profits. Therefore, firms will enter the market and compete away the positive economic profits. This is due to the fact that prices will decline from the increase in supply because there are no barriers to entry in a perfectly competitive market. O In graph (IV) the firm is earning an economic loss. However, the firm will continue to operate in the short-run because price is greater than average variable costs. Therefore, the firm is covering average variable costs and reducing the overall burden of total fixed costs. In graph (Ill) the firm is earning an economic loss. This is due to the fact that average total costs is greater than price. However, the firm will continue to operate in the short-run because price is greater than average variable costs. This means that the operating loss is less than the shutdown loss