Question: The graph on the left below shows long-run average and marginal cost for a typical firm in a perfectly competitive industry. The graph on the

The graph on the left below shows long-run average and marginal cost for a typical firm in a perfectly competitive industry. The graph on the right shows demand and supply in the market. Show your answers on the graphs.

  1. What is the current price in the market?
  2. What output will maximize profits for the firm at this market price?
  3. How much profit will the firm earn at this market price?
  4. Is this a long-run equilibrium for a perfectly competitive firm? Why or why not? In not, what would be the price when the industry gets to long-run competitive equilibrium?
  5. Why can't firms in competitive industries make long-run economic profits?

The graph on the left below shows long-run average and marginal cost

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