Question 1 (a)

• Graph for the market and a typical firm

  

• Graph for a typical firm should include

  • Marginal Cost

  • Marginal Revenue

  • Demand (Price)

  • Average Total Cost

Question 1 (d)

• Long-Run Average Total Cost

  • Short-run and long-run average total cost curves differ because a firm can choose its fixed cost in the long run.

  • If a firm plans on producing a high amount of output, it might make sense to have a high fixed cost

  • Conversely, if a firm plans on producing a small amount of output, it might make sense to have a low fixed cost

  

Question 2 (a)

• Positive Social Externality

  

Question 2 (b)

• The price ceiling will increase the deadweight loss, because providers will decrease the quantity.

Question 3 (c)

• the MFC curve (or the supply curve for labor) becomes horizontal at the minimum wage up to the quantity of minimum wage