Question 1 (b)
Graph for a profit-maximizing firm in a perfectly competitive constant-cost industry earning positive economic profit
- Label Market and Firm above each graph
AR = Price
Question 1 (c)
For a company in a perfectly competitive market
Raising the price --> Quantity falls to 0 --> Total Revenue falls to 0
Because the firm is a price taker / is facing a perfectly elastic demand / losses all of its customers / has no market power
Question 1 (d)
Lump sum subsidy has no effect on marginal revenue or marginal cost
Only fixed costs will be affected.
Positive profits lead to entry of new firms that will increase the industry supply.
Question 3 (e)