Question #1 (5 points) Suppose that after accounting for its revenue and expenditure for 2023 a company finds that it earned total revenue of $3 million dollars and had total explicit costs equal to $2 million dollars. This gives them \"accounting profit\" of $1 million dollars. If this firm operated with plant and equipment valued at $20 million dollars, and had an opportunity cost of 1 million dollars per year for these assets, did this firm earn any \"economic profit\"? State whether the firm either did or did not earn \"economic profit\" in 2023, and briefly explain why it did or did not earn any \"economic profit\". Question #2 (40 points) $/unit MC 1.10 Q 903} 31 162 199 220 Q Assume a competitive firm faces the cost structure (cost curves) and market price shown in the figure above, all firms operate with the same technology, and the cost structure (cost curves) remain the same in the long-run. In the short-run, the market price is $1.10 and this firm maximizes profit by producing 220 units of output. (a) With free entry and free exit in this market, what would the long-run equilibrium price be in this market? Is this above or below the market price of $1.10 shown on the figure? (b) Briefly explain what would cause the price to change from the $1.10 initially observed in this market to the long-run equilibrium price you determined in part (a). (c) Does the competitive firm earn economic profits at the long-run equilibrium price you determined in part (a)? (d) From the perspective of the consumer, is the long-run equilibrium price you determined in part (a) preferable to $1.10? Is the long-run equilibrium price you determined in part (a) preferable to $1.10 from the perspective of the producer? In both cases, briefly explain why the long-run equilibrium price you determined is or is not preferable from the perspective of the producer or the consumer. Question #3 (S points) When a company is said to operate with \"increasing returns to scale\" or \"economies of scale\" it becomes more productive as it becomes larger. \"More productive\" means it uses fewer units of inputs to produce a unit of output. Briefly explain why increasing returns to scale could lead to a natural monopoly. Question #4 (50 points) $/unit 1.20 91 .89 '88 2 162 199 0 180 Suppose that a monopolist operates with the cost structure (cost curves), demand curve, and marginal revenue curve shown in the figure above. a) Briefly explain why a monopolist faces a downward sloping demand curve. b) Briefly explain why a monopolist has a marginal revenue curve. ) What price would this monopolist set for its output? d) How many units of output would be sold at this price? e) Does this monopolist earn positive economic profits at the price you determined in part ()? If they do earn positive economic profits at this price, is there any reason to expect this price to change in the long-run