The packaged milk market in Pakistan is perfectly competitive.

i.Some firms in the market are making profit, others are having losses. Draw and explain graphs showing MC, ATC, MR, AR, price and quantity of output to illustrate these situations.

ii.In the short run some of these firms may decide to shut down temporarily. In the long run some of these firms may exit the market, and new firms may enter. Draw and explain graphs to show these situations and short run and long run supply curves.

iii.If firms can enter and exit the packaged milk market in the long run but not in the short run, show how a decrease in demand due to lower incomes of Pakistani consumers during COVID Pandemic affects price and profitability.