The following graph shows the supply curve and three different demand curves for a perfectly competitive industry. The table represents cost data for a representative firm in the industry. 

a. Use the data in the table and draw a graph for the representative firm in the industry when the industry demand curve is represented by D₁. What is the profit or loss for this firm? Shade in the profit or loss area on the graph.

b. Draw a graph for the representative firm when the industry demand curve falls to D₂. What is the profit or loss for this firm? Shade in the profit or loss area on the graph.

c. Draw a graph for the representative firm when the industry demand curve falls to D₃. What is the profit or loss for this firm? Shade in the profit or loss area on the graph.

Transcribed Image Text:

Market Price P = 25 P = 15 P* = 10 Price per unit (S) PM = 25 P = 15 p*= 10 q* @p* = MC 600 400 300 Dy Units of output, Q ATCQ p = MC AVC@p*= MC $15 18 21 S $10 10.50 11