Answer this question according to lecture discussion. Assume the diagram provided below represents the marginal cost (MC), the average variable cost (AVC), and the average total cost (ATC) in relation to the output (q) of a typical firm in a perfectly competitive industry where all firms have identical cost structure. MC 12 ATC 10 8 AVE 6 4 2 20 40 60 80 100 120 140 q (a) Explain how to calculate the profit/loss of a typical firm in this industry when market price per unit is at $12, $8, $4, and $2. Mark the areas representing these profits/losses in the diagram provided. (6 marks) Answers: Price at $12, Profit = $300; Price at $8, Profit - $0; Price at $4, Profit - -$250; Price at $2, Profit - -$270 (b) For each of the possible market prices given in part (a), explain whether the firm should produce or shut down. Support your argument with numbers. (8 marks) Answers: Produces when price is at $12, $8, and $4, but shuts down when price is at $2 (c) Suppose there are 100 identical firms in this industry, explain how to derive the short-run industry supply curve and plot it in a separate diagram. (Hint: When market price per unit is at $3, $4, $8, $10, and $12) (6 marks) Answers: Market Price (per unit) Quantity Supplied by a Typical Firm Quantity Supplied in the Industry 40 4000 50 5000 80 8000 10 90 9000 12 100 10000