This firm is one of a 1,000, exactly the same, operating in a perfectly competition market.

Based on the diagram below complete the questions in Parts 1 and 2.

Part 1

a)If the equilibrium price in the industry market is $7, what is the Marginal Revenue for this firm?

b)At a market price of $7 what is the Average Revenue for this firm?

c)At a price of $7 how many units will this firm produce in the short run to maximize profit? (look for MR = MC, Round off your answer to the nearest 100 units)

d)What is the unit cost at the level of output in c), ? (Check ATC)

e)What will be its profit or loss per unit at this level of output?

Part 2

a)At a price of $5.50 how many units will this firm produce in the short run to maximize profit?

b)What is the cost per unit at this level of output? (See ATC)

c)What will be its profit or loss per unit at this level of output?

3 Marks