1. Assume that pencils are manufactured in a perfectly competitive market that is in long-run equilibrium. (a) Draw correctly labeled side-by-side graphs for the pencil market and for a representative rm and show each of the following. (i) The market price and quantity, labeled PM and QM, respectively (ii) The rm's prot-maximizing price and quantity, labeled PF and QF, respectively (b) What is the relationship between PM and PF? Explain. (c) Rent on the factory building is an important fixed cost in the production of pencils, and the industry experiences signicant increases in rent. (i) What will happen to the firm's prot-maximizing quantity in the short run? Explain. (ii) On your graph in part (a), show the impact of the rent increase and completely shade the area representing the rm's profit or loss in the short run. ((1) As a result of the rent increase, what will happen to each of the following in the long run? (i) The number of firms in the market. Explain. (ii) The market equilibrium quantity relative to QM and the market equilibrium price relative to PM. Explain