Tulip growing is a "perfectly" competitive industry, and all tulip growers have the same cost curves (or schedule) with the standard U-shaped Average Total Cost Curve.

The market price of the tulip is $15 a bunch, and each grower maximizes profit by producing 1,500 bunches per week.

At the profit-maximizing output, the average total cost of producing tulip is $10 a bunch and the average variable cost is $8 a bunch.

• Calculate a tulip grower's economic profit in the short run?
• What may happen to the economic profit of a tulip grower if the market demand for tulips increases (or shifts to the right)?
• How does the number of tulip growers may change in the long run?
• What is the economic profit in the long run?
• What market price will induce the tulip growers to "shut down" in the short and long-run.
• Explain why the tulip growers may be interested in forming a trade group or association and require new growers to be licensed.