In a perfectly competitive market, firms are earning normal profits. Firms will earn economic profits when ceteris paribus… a) Market demand increases in the short run. b) Market demand increases in the long run. c) Firms in a perfectly competitive market cannot earn economic profit. d) There is a decrease in the price of substitutes of the product.

Price P MC 2. This will be 2 3. This will be 3 ATC MR Price =MC = Minimum ATC (normal profit) The graph above shows the long-run equilibrium for a competitive market. Assume that in Saudi Arabia, we manage to have pure competition for all goods and services. Assume, in the long-run, we witness the above equilibrium for the entire economy. In terms of welfare outcome, 1. This will be 1 outcome for consumers. outcomes for producers. outcome for the society. The number 1 statement above is true because consumers_4 The number 2 statement above is true because producers 5 The number 3 statement above is true because the society 6

Instructions: Answer to the best of your ability. Show all of your work, the details, excel tab.   The Market for Good X is perfectly competitive, with market supply and own-price demand curves given as    q_s=-25000 + 3000p q_d=135000-5000p   a.  Determine the equilibrium price and quantity in the market for good x. (Note: You are not anlayzing an individual firm here. You are analyzing the entire market).   Suppose the individual firm's average total costs are dfined by  TC=1/3q^3-3q^2+28q+2       b. What is the firm's demand curve (don't give me back the industry demand curve. The firm's demand curve is what I want.)   c. find the profit maximizing level of output for the firm (I've given the marginal cost curve below).   MC=q^2-6q+28     d.  If this firm is making a profit (loss) how much is the profit (loss)?

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