Consider an individual firm competing in a market with many other producers. Assume this firm faces a conventional production technology. The short-run production function has a small range of increasing marginal product (increasing marginal returns) and then is subject to the Law of Diminishing Marginal Product (diminishing marginal returns).

• Putting quantity q on the horizontal axis and dollars $ on the vertical axis, depict four important curves: Average Fixed Cost (AFC), Average Variable Costs (AVC), Average Total Costs (ATC), and Marginal Cost (MC).
• For this question, assume the individual producers in this industry have no control over prices; they must accept the exogenously given price, P₀.On a graph containing the four curves MC, AFC, AVC, and ATC, depict the profit-maximizing output for this firm under the assumption that the exogenously given price of P₀ is sufficiently high to allow the producer to arrive at an optimal output, q₀, that results in positive profits.
• Graphically indicate the size of the profits for this firm at the exogenously determined price of P₀.
• Finally, consider a new shock to the market. This new shock has pushed prices down to a new level, P₁. Again, the firm cannot change this market-determined price.
• Graphically show this new profit-maximizing output q₁ for this firm given that (a) it has negative profits in this outcome and (b) it does not choose to shut down. Show and label all relevant curves, price P₁, and the new equilibrium output q₁.