Imagine you have been hired by Jurassic Smoothies, the only firm with access to dinosaur bones used to make these exotic smoothies. The following graph shows Demand, Marginal revenue, Marginal cost, and Average Total Costs curves for the smoothies. Supposeinitialaverage total costs is ATC1.Use the graph to answer the following questions:

1. What is the profit maximizing quantity of smoothies? (2 points)
2. What price should Jurassic charge for these smoothies? (2 points)
3. For that price and quantity does Jurassic Smoothies make economic profit, economic loss or breaks even?How do you know? Explain your answer. (3 points)
4. Suppose an innovation reduces the firm's fixed costs and reduces average total cost fromATC1toATC2.What is profit maximizingquantityandpriceafter the innovation? (2 points)
5. After the innovation does the firm make economic profit, economic loss or breaks even? How do you know? explain your answer. (3 points)

Price/ Costs ATC1 MC ATC2 $14 12 10 7 MR D . - - -. 40 60 70 110 Quantity (hundreds/week)