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Microeconomics (Spring 2017)Problem Set 5: Perfect Competition and Policy AnalysisSubmit in Recitation or Lecture, March 27/28, whichever comes first•Write your answers on separate sheets of paper. Please include:–your name–your recitation teacher’s name–day and time of your recitationPart I: Short Answer1. Draw a graph showing the average total cost, average variable cost, and marginal cost curves for a typicalfirm. On your graph, draw in three prices: label asP3a price that results in the firm making positive profits;label asP2a price that results in the firm breaking even; and label asP1a price that results in the firmmaking negative profits that are less than fixed costs.Part II: Competitive Supply1. Suppose that each perfectly competitive firm in an industry has the short-run cost functionC= 10 + 2q+q2,and the market price is $12.What is the profit-maximizing output level for each firm?What is the totalrevenue? What are the profits?1