Problem 2 (Perfect Competition) MC = ATC 41.50 AVC 4.00 3.50 '8 2.50 '8 Price and cost [dollars per bushel} 1.50 LOO 0.50 0 100 200 300 400 500 Quantity [diamonds of bushels per year] The gure above shows a typical perfectly competitive corn farm, whose marginal cost curve is MC and average total cost curve is ATC. Assume the market is in a longrun equilibrium now. Problem a. 1.-'l.-"hat is the equilibrium price and quantity in the longrun equilibrium? Ex plain your answers. Now assume the market demand for corn decreases and, in the short run, the price falls to $2.50 per bushel. Problem b. On the gure above, show the farm's economic prot [loss in the shortrun equilibrium. Problem c. Explain how the market will adjust to the longrun equilibrium. (Hint: use a graph to Show how the supply more adjusts in the long run.)