1. Show the cost structure of a perfectly competitive firm earning a short-run economic profit. Be sure to include all relevant cost curves, the demand and marginal revenue curves. Indicate the price of the good and the quantity sold and show the difference between prices and costs that show the economic profit.
2. Using demand and supply, show a market where the current price is creating a shortage in the market. Show supply demand, the price and quantity demanded and supplied that creates the shortage and indicate where the equilibrium price and quantity should be.
3. Why does the ease of entry and exit into and out of a market eliminate long-run economic profits in perfect competition and monopolistic competition?