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Answer Key #EconomicsMr. BekemeyerProfits and Perfect Competition(Unit VI.iProblem Set Answers)Please type your responses and include the question.1.Your roommate’s long hours in the chem lab finally paid off -- she discovered a secret formula that lets people do an hour’s worth of studying in 5 minutes. So far, she’s sold 200 doses and faces the following average-total-cost schedule:Quantity(doses)Average Total Cost199$199200$200201$201If a new customer offers to pay your roommate $300 for one dose, should she make one more? Explain.
2.Many small boats are made of fiberglass, which is derived from crude oil. Suppose that the price of oil rises (this causes the minimum ATC to be higher than the new price).a.Using diagrams, show what happens to the cost curves (MC & ATC) of an individual boat-making firm and to the market supply curve.b.What happens to the profits of boat makers in the short run? What happens to the number of boat makers in the long run?