In these questions, my goal is to know your thinking and understanding of the concept, so use as many words and diagrams as you think as appropriate to explain your answer

1. With the help of an example explain the difference between accounting and economic profit. Building on your answer then explain why a perfectly competitive firm would operate in the long run even if it makes 0 profit. ( 4 points)
2. Glorious Ghoribas is a perfectly competitive cookie maker in Rabat Medina. Its costs are

Output Total costs

0	14
1	38
2	48
3	62
4	80
5	102
6	128

1. What is their profit max output and how much profit do they make if the market price is 12 dhs
2. What is the firms shut down point?
3. Explain why a firm continues to operate if ATC>P>AVC.
4. When will this firm exit the market in the long run? (6 points)
5. A firm is producing 20 units with an average total cost of $25 and a marginal cost of $15. If it increases production to 21 units, which of the following must occur? (1 point)

a. Marginal cost will decrease.

b. Marginal cost will increase.

c. Average total cost will decrease.

d. Average total cost will increase

1. The market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently incurring economic losses. Draw a graph showing this situation for a firm in the short run. (5 points)
2. Suppose he cement industry is perfectly competitive and begins in a long-run equilibrium.

Lets say one firm within the industry invents a new process that sharply reduces the cost of producing cement. (For this question you don't need to use diagrams; just explain to me what you think happens) (5 POINTS)

What happens to this firms profits and to the price of cement in the short run when this firms patent prevents other firms from using the new technology?

What happens in the long run when the patent expires and other firms are free to use the technology?