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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

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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 a perfectly competitive market.

  1. What will this firm's total revenue be if the market price is $4?
  2. Assume the market is in short-run equilibrium and this firm is earning normal profits. What must be the market price?
  3. If the short-run market price is $6, will the firm produce or shut down?
  4. How would the price from part (c) move to the long-run equilibrium price level? Explain.
  5. If the government instituted a lump-sum tax, which of the curves above would move, if any?

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