A perfectly competitive market for a commodity product exists, and initially the market is in long-run equilibrium, with a price of $20 per unit.

In this market there is one profit-maximizing firm that has lower cost than other firms in the market. In the initial long-run equilibrium this unique firm earns total economic profit of $30 million on its sales revenue of $100 million.The graph below shows the unique firm's (short-run) average cost curve.

As the market moves into the next short-run time period, there is an unexpected increase in market demand, and the market adjusts to a new short-run equilibrium.

Statement to evaluate:Comparing the new equilibrium (with the unexpected increase in market demand) to the initial equilibrium: For this unique firm, the firm's average economic profit per unit changes by more than the firm's average revenue per unit changes.

[In your answer, use the graph (and/or draw and use one or more other graphs), adding any lines, curves, or labels that you need.]

$/unit AC 20 units