Homework 2 Question 1 A profit-maximizing firm in a competitive market is currently producing 100 units of output. It has average revenue of $10. average total cost of S8, and fixed costs of $200. a. What is its profit? b. What is its marginal cost? c. What is its average variable cost? d. Is the efficient scale of the firm more than, less than, or exactly 100 units? Question 2 Does a competitive firm's price equal its marginal cost in the short run, in the long run, or both? Explain. Question 3 The market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently incurring economic losses. a. How does the price of fertilizer compare to the average total cost, the average variable cost, and the marginal cost of producing fertilizer? b. Draw two graphs, side by side, illustrating the present situation for the typical firm and for the market. (Upload a picture) C. Assuming there is no change in either demand or the firms cost curves, explain what will happen in the long run to the price of fertilizer, marginal cost, average total cost, the quantity supplied by each firm, and the total quantity supplied to the market. Question 4 An industry currently has 100 firms, each of which has fixed costs of S16 and average variable costs as follows: Quantity Average Variable Cost Average Total Coa Mapinal Cost SI 3 a. Compute a firm's marginal cost and average total cost for each quantity from 1 to 6. b. The equilibrium price is currently S10. How much does each firm produce? What is the total quantity supplied in the market? c. In the long run, firms can enter and exit the market, and all entrants have the same costs as above. As this market makes the transition to its long-run equilibrium, will the price rise or fall? Will the quantity demanded rise or fall? Will the quantity supplied by each firm rise or fall? Explain your answers