Question 2

The market for peanut butter in Nutville is monopo. listically competitive and in long-run equilibrium. One day, consumer advocate Skippy Jif discovers that all brands of peanut butter in Nutville are identical. Thereafter, the market becomes perfectly competitive and again reaches its long-run equilibrium. Using an appropriate diagram, explain whether each of the following variables increases, decreases, or stays the same for a typical firm in the market.

1. price
2. quantity
3. average total cost
4. marginal cost
5. profit