1 . Total Average Average Marginal Prot Cost Variable Total Cost Cost Cost n ______ ______ _______ _______ ______ n \"_____ n \"_____ a. Complete the above table. What is the rm's xed cost? How can you tell? Hint: if the rm is not producing output, it still must pay its xed cost but incurs no variable cost. b. Graph the cost curves and draw in the price. What is the prot maximizing price and quantity? How much prot does the rm earn? Show the prot on the graph? c. Suppose the price rises to $550 a ton. How much output should the rm produce? d. Think about the market in the long run. If the price remains at $550 a ton, do you think that new rms will enter or exit the market? Why? What effect do you think that will have on price in this market? 2. Bob's lawn-mowing service is a prot-maximizing rm operating in a perfectly competitive market. Bob mows lawns for $27 each. His total cost each day is $280, or which $30 is a xed cost. He mows 10 lawns a day. What are Bob's decision rules about when to shut down and when to exit the market? Answer using numbers! Refer to the shut-down and exit rules from the lectures on perfect competition. 3. Assume the market for fertilizer is perfectly competitive. Firms in the market are producing output, but they are currently making economic losses. a. How does the price of fertilizer compare to the average total cost, the average variable cost, and the marginal cost of producing fertilizer? b. Draw the two graphs, side by side, illustrating the present situation for the typical rm and for the market. c. Assuming there is no change in demand or the rms' cost curves, explain what will happen in the long run to the price of fertilizer, marginal cost, average total cost, the quantity supplied by each rm, and the total quantity supplied in the market