Slothco is a firm in a perfectly competitive, constant-cost industry. Its total cost function is shown below: (e) Using two completely labeled...
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Slothco is a firm in a perfectly competitive, constant-cost industry. Its total cost function is shown below:


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(e) Using two completely labeled side-by-side graphs, illustrate how the market sets the short-run demand for Slothco. (Base your graphs on the perfect competition model, not the prior data.) Label the market equilibrium price Pe and quantity Qe. Label the profit-maximizing quantity for Slothco Qf. Assume that Slothco is earning normal profit.


(f) Illustrate the short-run effect of an increase in market demand on your graphs from part(e). Label the new market equilibrium price Pe2 and quantity Qe2. Label the new profit-maximizing quantity for Slothco Qf2. Shade completely the area of Slothco's economic profit or loss.  


(h) In two side-by-side graphs, draw a new perfectly competitive market and individual firm experiencing short-run economic losses. Illustrate what will happen to the market in the long run and the impact on the firm's losses. Be sure to completely label your graphs.

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