Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly

labeled diagram must have all axes and curves clearly labeled and must show directional changes.

If the question prompts you to "Calculate," you must show how you arrived at your final answer.

The table below shows the total variable costs faced by Emily's Eye Care Store for different quantities

of Good M sold.

Emily's Eye Care Store sells Good M in a perfectly competitive market with a downward-sloping

demand curve and an upward-sloping supply curve. The market price is per unit, and the total fixed

cost is .

(a) Identify the profit-maximizing quantity. Explain using marginal analysis.

(b) Calculate the economic profit at the profit-maximizing quantity you identified in part (a). Show your

work.

(c) Calculate the average fixed cost of producing units. Show your work.

(d) Based on your answer to part (b), will the number of firms in the industry increase, decrease, or stay

the same in the long run? Explain.

(e) Based on your answer to part (b), will the market price increase, decrease, or stay the same in the

long run? Explain.

(f) The income elasticity of demand for Good M is , and the cross-price elasticity of demand for

eyeglasses with respect to the price of Good M is . Based on your answer to part (e), what will

happen to the demand for eyeglasses? Explain.

(g) Now assume that the market in which Emily's Eye Care Store operates is in long-run equilibrium at

a price of per unit.

(i) Suppose annual property taxes for Emily's Eye Care Store increase by . Will the profit-

maximizing quantity of Good M for Emily's Eye Care Store increase, decrease, or stay the same in the short run? Explain.

(ii) Instead suppose the government imposes a price floor at on the market for Good M. Will

deadweight loss in the market for Good M increase, decrease, or stay the same in the short run as a

result of the price floor? Explain.

Quantity Total Variable Cost $20 2 $25 College Board program. Use or distribution of these materials online or in print beyond your omics $35 $50 $70 $95 $125 $160 $200 10 $245