1. Consider Caroline's Closet, which sells boutique clothing in a busy mall in a major city. The mall contains several other clothing boutiques. a. Draw a graph showing the marginal cost, average total cost, demand, marginal revenue, and profit maximizing price and quantity for Caroline's Closet, assuming Caroline's current profit-maximizing price is greater than average total cost. Label the areas representing profit and deadweight loss. b. How would demand at Caroline's be impacted in the long run due to entry or exit from this market? 2. Suppose the government levies a lump sum tax on firms operating in a monopolistically competitive market that is currently in long run equilibrium. a. Draw the graph of a representative firm to show the short run impact of this tax at the firm. b. Draw the graph of the market to show what will happen to the equilibrium price, quantity and number of firms in the market. 3. Suppose firms operating in the monopolistically competitive snack food market adopt a new food processing technology that decreases average total cost at the firms, while marginal cost remains unchanged. a. Draw a market graph to show what will happen to the number of firms operating in the market. b. What happened to market quantity? c. What happened to market price? d. Draw a firm graph to show what will happen to the price and quantity produced at a representative firm