1. What assumptions are necessary for a market to be perfectly competitive? Explain why each of these assumptions is important. 2. Suppose Veronica sells teapots in the perfectly competitive teapot market. Her output per day and her costs are as follows: Output per Total Cost Variable Cost ATC = AVC = MC = MR = TC-FC TC/Q VC/Q change in TC/change in Q $20 $0 - - 1 5 day 0 2 3 4 _ 136 116 17 14.5 23 15 Suppose the current equilibrium price in the teapot market is $15. To maximize prot, how many teapots will Veronica produce, what price will she charge, and how much prot (or loss) will she make? Draw a graph to illustrate your answer. Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her prot (or loss). 3. Blueberry market is perfectly competitive. Suppose that blueberry farms are all making an economic prot. What happens as time passes? What is the long-run equilibrium outcome? Revenue MC and cost (dollars per unit) $40 MB A TO A VC 0 55 100 150 200 Quantity 4. Use the figure above to answer the following questions. a. How can you determine that the figure represents a graph of a perfectly competitive firm? Be specific; indicate which curve gives you the information and how you use this information to arrive at your conclusion. b. What is the market price? What is the profit-maximizing output? d. What is total revenue at the profit-maximizing output? e. What is the total cost at the profit-maximizing output? f. What is the profit or loss at the profit-maximizing output? What is the firm's total fixed cost? h. What is the total variable cost? i. Identify the firm's short-run supply curve. j. Is the industry in a long-run equilibrium? k. If it is not in long-run equilibrium, what will happen in this industry to restore long-run equilibrium? 1. In long-run equilibrium, what is the firm's profit maximizing quantity