Exercise 1 (Perfect/Pure Competition) This exercise provides practice in using graphs in a perfectly competitive market situation. Figure 6.3 Price or Cost (per Item) NWAGONOOC 2 3 4 5 6 Quantity (items por hour) Please note these formula for calculating costs and revenues. You will need them to solve the questions. Total Revenue (TR) = Price x Quantity Total Cost (TC) = ATC x Quantity Economic Profits = TR - TC or Economic Profit per unit x Quantity Economic Profit per unit = Price - ATC For a perfect competitive firm: P=MR=Demand and it would produce at the level of output where MR=MC