Suppose there is a perfectly competitive market where firms are currently making a positive economic profit....

Suppose there is a perfectly competitive market where firms are currently making a positive economic profit.

a) Represent this perfectly competitive market and a single firm in that market with a graph with all of the usual labels. You do not need the AVC (average variable cost) curve.

b) Mark on your graph the individual firm's profits

Suppose there was an increase in demand for this good. The next questions all refer to this event.

c) Show this event on your graph.

d) What happened to equilibrium market price and market quantity?

e) What happens to the individual firm's production?

Expert Solution

Rahul Sunny answered 2 years ago

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