1). Homework: Philadelphia Foods + Perfect Competition

a). Where does a competitive firms demand curve come from? Explain why a competitive firm is a price taker.

b). The Philadelphia water ice industry is a constant cost industry. The demand for water ice shifts outward each year when it gets hot. What are the steps by which the competitive water ice market insures an increased amount of water ice. Explain and graph at the industry and firm levels. What is the long-run price of water ice?

c). The Philly soft pretzel industry is likewise competitive. Just look at all the sellers out in the streets of Philadelphia!! The difference is that the pretzel industry is an increasing cost industry. Show the effect of a demand increase in the pretzel market both at the industry and the firm level. Could the warm weather of early summer affect the pretzel industry too, discuss?