Problem 1 Firm in Perfect Competition: SIPAlicious is a typical rm in the perfectly com petitive market for sugar cookies. SIPAlicious' average total cost function is ATC = 100/ (2+ 100+ 1/4Q, Where Q represents the number of units, and each unit contains 1,000 cookies. SIPAlicious' marginal cost is MC : 100 + 1/2Q. a} Illustrate M C and ATC on a graph. Calculate the production level at which the average total cost reaches its minimum and indicate it on the graph. b) Briey explain the difference between ATC and MC. c) Briey explain why the optimal output is the one at which marginal cost is equal to price. cl} Derive SIPAlicious' supply function. e} If the market price is equal to $120 per unit (of 1000 cookies), What is the protmaximizing level of output? Calculate SIPAliciousJ prot and illustrate it on the graph that you drew in part a). f) What price will prevail in the long run? Explain. (Hint: Remember the prot opportunities for rms in perfectly competitive markets in the long run.)