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a. What are the characteristics of a perfectly competitive market? [8pts] b. Assume the market for tortillas is perfectly competitive. The market supply and demand curves for tortillas are given as follows: Supply curve: P = .OUOOOZQ Demand curve: P = 11 - .OOOOZQ The short run marginal cost curve for a typical tortilla factory is: MC 2 .1 + .0009Q i. Determine the equilibrium price for tortillas. ii. Determine the prot maximizing short run equilibrium level of output for a tortilla factory. iii. At the level of output determined above, is the factory making a prot. breaking-even, or making a loss? Explain your answer. iv. Assuming that all of the tortilla factories are identical, how many tortilla factories are producing tortillas? [12pts.) a. Define Marginal revenue and Marginal cost. Explain why these two should be equal at the profit maximizing level of output. (10pts) b. A monopoly faces the following demand curve: Q = 81/P^2 where Q is the quantity demanded and P is the price. Its average variable cost is AVC = Q^0.5 and its fixed cost is 2. i. What are its profit-maximizing price and quantity and what is the resulting profit? [Hint: MC = 1.5Q^0.5; MR = 4.5Q^(-0.5)] ii. Suppose the government regulated the price to be $4.00 per unit. How much will the monopolist produce and what will profit be with this regulation? iii. Suppose the government wants to set a ceiling price that induces the monopolist to produce the largest possible output. What price will accomplish this goal