QUESTION 3 (a) Potter Pty Ltd produces ceramic pots and operate in a perfectly competitive market. Their costs are presented in the table below: Output Average Average cost Marginal cost ($) variable cost ($) ($) 1 11 41 11 2 10 25 9 3 8.67 18.6\";r 6 4 IS 15 4 5 7.2 13.2 6 6 I67 12.6? 10 7" 8.57 12.86 14 8 10 13.75 20 (1) How many pots do they sell if the current market price is $14? (2 marks) (ii) What is the value of their profit or loss when the price is $14. (2 marks) (iii) Suppose price falls to $10. Explain how this would affect their decision to operate in the short run as well as in the long run. (3 marks) (b) A perfectly competitive industry is initially in long run equilibrium. Now suppose the government imposes a tax on producers in this market. Using clearly labelled graphs, discuss the adjustment process that will occur in this market as a result. (3 marks) [Total for Question 3: 10 marks]