The graph above shnws the shprt-run cost structure of a firm in a perfectiy competitive industry. a} Identify the cost curves that are denoted by each of the following labels: i} Curve 1 ' ' ii} Curve 2 iii] Curve 3 b} Explain why Curve 1 does each of the following as output increases: i} Initially decreases ii} Finally increases :1 What measure of cost is represented by the vertical distance between Curve 2 and Curve 3? d] Explain why the vertical distance between Curve 2 and Curve 3 decreases as output increases. e} Using the letters on the graph, identify 2 points on the rm's short-run supply curve. ' C. Should this firm produce in the short run? Why or why not? D. Will this rm earn a prot or incur a loss? Explain. 2. Assume that in a perfectly competitive market, a firm's costs and revenues are: Marginal Cost = average variable cost at $20.00 Marginal Cost = average total cost at $30.00 Marginal Cost = marginal revenue at $25.00 *These relationships are where MC crosses each respective curve (picture the graph...or sketch it) A. How will this firm determine the prot maximizing level of output? Explain. B. What price will this rm charge? Explain how that price is determined