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Use the graph to answer the free-response question. Show any calculations and be sure to label your response. Assume that the firm above operates in
Use the graph to answer the free-response question. Show any calculations and be sure to label your response.
Assume that the firm above operates in a perfectly competitive market.
- What will this firm's total revenue be if the market price is $4?
- Assume the market is in short-run equilibrium and this firm is earning normal profits. What must be the market price?
- If the short-run market price is $6, will the firm produce or shut down?
- How would the price from part (c) move to the long-run equilibrium price level? Explain.
- If the government instituted a lump-sum tax, which of the curves above would move, if any?
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