Assume that the market for Red Onions is perfectly competitive. The typical firm is earning positive economic profit in the short-run equilibrium.

(a) Draw a correctly labeled graph for the typical firm, illustrating the short-run equilibrium and labeling the equilibrium market price and output PE and QE, respectively.

(b) Assume there is an increase in the market wage rate for labor, a variable input. Show on your graph in part (a) the effect of the wage increase on the marginal cost curve in the short run.

(c) Assume that avocado producers hire workers from a perfectly competitive labor market. Draw a graph of labor supply and demand for the typical firm and label the supply curve MFC and the demand curve MRP. Assume the market wage rate increases from w1 to w2. Show the effect of the wage increase on the graph, labeling the initial quantity of labor hired QL1 and the new quantity of labor hired QL2.