1. Equilibrium and Break-Even Price. Explain why the equilibrium price in a perfectly competitive industry is sometimes below the break-even price, sometimes above it, and sometimes equal to it. 2....

1. Equilibrium and Break-Even Price. Explain why the equilibrium price in a perfectly competitive industry is sometimes below the break-even price, sometimes above it, and sometimes equal to it.

2. Maximizing the Profit Margin? According to the marginal principle, the firm should choose the quantity of output at which price equals marginal cost. A tempting alternative is to maximize the firm’s profit margin, defined as the difference between price and short-run average total cost. Use the firm’s short-run cost curves to evaluate this approach. Draw the firm’s short-run supply curve and compare it to the supply curve of a firm that maximizes its profit.