Answer the following Free Response Question on a separate sheet of paper. Attach your answer to the quiz when you turn it in. Bestmilk, a typical profit-maximizing dairy firm, is operating in a constant-cost, perfectly competitive industry that is in long-run equilibrium. (a) Draw correctly labeled side-by-side graphs for the dairy market and for Bestmilk and show each of the following. (i) Price and output for the industry (ii) Price and output for Bestmilk (b) Assume that milk is a normal good and that consumer income falls. Assume that Bestmilk continues to produce. On your graphs in part (a), show the effect of the decrease in income on each of the following in the short run. (i) Price and output for the industry (ii) Price and output for Bestmilk (iii) Area of loss or profit for Bestmilk (c) Following the decrease in consumer income, what must be true for Bestmilk to continue to produce in the short run? (d) Assume that the industry adjusts to a new long-run equilibrium. Compare the following between the initial and the new long-run equilibrium. (i) Price in the industry (ii) Output of a typical firm (iii) The number of firms in the dairy industry