Microeconomics

Product A is sold in a perfectly competitive, constant-cost industry. a. Draw a sideby-side graph for product A showing the market in long-run equilibrium with an individual firm earning normal profit. Label each of the following: i. The market's equilibrium price (PE) and quantity (QE) ii. The firm's profit-maximizing quantity (05) b. How would it affect the quantity demanded if the government imposed a price floor below PE? c. The price of B, a complement for product A, decreases. Illustrate on your graph from part (a) the result of this in the short run. i. Label the new market price (P2) and new market quantity (02). ii. Shade completely any profit or loss for the firm. d. The price of B decreased by 10 percent, while the quantity demanded of A changed by 15 percent. What is the cross-price elasticity of A and B? e. What happens to the productive efficiency of the firm in the short run as a result of the change described in part (c)? f. What will happen to the price of A in the long run? Explain. g. In long-run equilibrium, the individual firm produces 50 units of A. At that level of output, its total cost is $200. What must be the market price? h. The whole market from part (9) clears at a quantity of 2,000 units in the long run. If the constant long-run supply would intersect the yaxis at $3 and the demand curve intersects the y-axis at $5, what is the consumer surplus? Tunica sells widgets in a perfectly competitive market. Below are its short-run total variable costs at different output levels. The firm's fixed cost is $12. The market price for one widget is $14. Units Total Variable Cost 0 $0 1 $12 2 $25 3 $60 4 $120 5 $200 6 $300 a. What is the average total cost of the 6th unit? b. What is the first unit of output where diminishing marginal returns have begun? c. What profit or loss would Tunica earn at its profit maximum? Show your work. d. Would Tunica operate in the short run? Explain. e. Would Tunica stay in the market in the long run? Explain. Use the graph to answer the free-response question. Show any calculations and be sure to label your response. .\\l(' 510 58 Price $6 $2 l0 l4 IS 18 22 Quantily Assume that the firm above operates in a perfectly competitive market. a. Which labeled price(s) could be the market price if this firm is earning positive economic profits? b. Explain how the short-run price(s) from part (a) could get to the long-run equilibrium price level. c. At which labeled price(s) from the graph would the firm operate in the short run but leave the market in the long run? d. If the short-run market price is $8, what will this firm's total revenue be? e. If the government instituted a per-unit tax, which curve(s) above would move