Firm W operates in a constant cost industry upon a perfectly competitive market and is earning positive economic profit.

a.Determine how does Firm W determine its profit-maximizing price? Explain fully.

b.Draw a set of labeled side by side graphs for Firm W and the predisposed market it operates in. Label the axes and :

i.The firm's quantity of output (Qe)

ii.The firm's ATC

iii.Market quantity (QE) and Market price (PE)

c.Fully shade the area of the firm's profit.

d.Determine whether the i and ii decrease, increase,or remain constant [all as the market moves to long-run equilibrium]:

i.Market equilibrium price

ii.Market equilibrium quantity

e.Let's say that the product that Firm W produces has a positive externality overall. Illustrate the MSB [marginal social benefit] on the market graph from part (b).

f.Determine. Will the unregulated market produce less or more than the socially optimal quantity seen?

g.Shade the area of DWL [deadweight loss] created by the externality when the market is in long run equilibrium and unregulated.