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Name: Period: Perfect Competition and Profit Maximization Part 1: Review- Answer the following questions. 1. Explain why firms in a Perfectly Competitive Market are "Price Takers" 2. What is the Shut Down Rule? 3. If Fixed Costs change, what costs curves will shift? If Variable Costs change, what cost curves will shift? Part 2: Free Response Question- Answer the following question, including correctly labeled graphs! 4. L & M Company operates in a perfectly competitive market for smoke alarms. L & M is currently earning short-run positive economic profits. a) Using correctly labeled side-by-side graphs for the smoke alarm market and L & M Company, indicate each of the following for both the market and the L & M Company. i. Price ii. Output b) On the graph in part (a) for L & M, indicate the area of economic profits that L & M Company is earning in the short run. Part 3: Free Response Question- Answer the following question, including correctly labeled graphs! 5. Fido Foods operates in a perfectly competitive market for dog food. Fido Foods is currently earning short-run economic loses a) Draw correctly labeled side-by-side graphs for the Dog Food market and for Fido Foods and show each of the following i. Price and output for the industry ii. Price and output for Fido Foods b) On the graph in part (a) for Fido Foods, indicate the area of economic loses that Fido Foods is earning in the short run. Micro Problem Set 3- Part 4Name: Period: Part 4: Chart Practice: You and your cousin Tommy decide to start producing oil filters instead of brake pads. Assume that your oil filters are sold in a perfectly competitive market and that the current price is $12. Use the information in the chart to answer the questions 6. If the market price is $12, what is the profit maximizing quantity for your firm in the short run? Oil Total Marginal Filters Cost Cost 7. Calculate the total revenue at the profit maximizing quantity. Show your work. 0 $20 8. Calculate the average total cost (ATC) of each oil 1 $30 filter at the profit maximizing quantity. Show your work. 2 $32 9. Calculate the profit or loss at the profit maximizing 3 $38 quantity. Show your work. 4 $45 5 $55 6 $70 7 $90 Micro Problem Set 3- Part 4