Question 1:

• The market for calculators is a perfectly competitive industry facing typical U-shaped ATC, AVC, and MC cost curves.
• Demand is linear and has a downward slope.
• The industry is filled with many homogeneous firms.
• At the time associated, firms in the industry are earning positive economic profits.
• Using a side-by-side graph that depicts both the market (on the left) and a representative firm (on the right), graphically depict this original short run equilibrium (SRE), showing (a) P (price), (b) Q (market output), (c) q (representative firm's output), and (d) (representative firm's profit).

Question 2:

• The market for calculators is a perfectly competitive industry facing typical U-shaped ATC, AVC, and MC cost curves.
• Demand is linear and has a downward slope.
• The industry is filled with many homogeneous firms.
• Using a side-by-side graph that depicts both the market (on the left) and a representative firm (on the right), graphically depict what will happen to (a) P (price), (b) Q (market output), (c) q (representative firm's output), and (d) (representative firm's profit) when the market moves from the original short run equilibrium (SRE) with positive profits you depicted in Question 1 to a new long run equilibrium (LRE).

Question 3:

Explain what happened to (a) P (price), (b) Q (market output), (c) q (representative firm's output), and (d) (representative firm's profit) when the market moves from theoriginal short run equilibrium (SRE)with positive profits in Question 1 to a new long run equilibrium (LRE) in Question 2.