__PRESENT

10. (8 points) Below, the graph on the left shows the short-run cost curves for a firm in a perfectly competitive market, and the graph on the right shows the current market conditions in this industry. Industry Firm 12 12 S SMC ATC 10 10 8 6 2 D 9 40 30 120 160 200 0 10.000 20,000 Output of the firm Industry output a. To maximize profit, how much output should the firm produce? b. What is the maximum amount of profit the firm can earn? c. What do you expect to happen in the long-run? (i.e. what is the long run equilibrium of a competitive market?)