Problem Set #5 Econ 311 Name: ________________________________ 1. Use the following graph of a perfectly competitive firm to answer the questions below. a. What is the profit maximizing level of...

Problem Set #5 Econ 311 Name: ________________________________ 1. Use the following graph of a perfectly competitive firm to answer the questions below. a. What is the profit maximizing level of output? Explain.b. Given the graphical depiction, above, solve for:i. Total cost (TC)ii. Total revenue (TR)iii. Profit (?)iv. Based on the profit calculated in part iii, what will happen in thismarket in the long run?c. Below what price will the firm choose to shutdown operations? Explain.d. At what level of output is the outcome sustainable in the long run? Why?2. Suppose a firm produces microwaves in a perfectly competitive microwavemarket. The total cost of producing microwaves is TC = 20 + 2q2 (MC = 4q).a. If the price of a microwave is $60, how many microwaves should the firmproduce?b. What will the firm’s profits be?c. Will the firm continue to stay in business? 3. Suppose there are two types of firms in the market and they have the followingmarginal cost functions for textbooks:Type 1: MC1 = 8 + 0.5q1 Type 2: MC2 = 8 + 2q2a. Solve algebraically for the market supply curve (QS) if there are 10 Type 1firms and 30 Type 2 firms. b. Suppose the inverse demand curve is P = 12 – 0.1QD. Solve for the marketequilibrium P* and Q*. c. Graphically depict the market equilibrium and the profit maximizingdecision for each type of firm. 4. True or false and explain.a. “If there are positive profits in the market, over the long run larger firmswill enter the market.”b. “Suppose an individual forgoes $20,000 in salary to start a business thatgrosses $80,000, while spending $60,000 for fixed and variable costs.Then the economic profit for the business is $20,000.”