A typical profit-maximizing firm in a perfectly competitive constant-cost industry is earning a positive economic profit. a. Is the market price greater than, less than, or equal to the firm’s price? Explain. b. Draw correctly labeled side-by-side graphs for both the market and a typical firm and show each of the following. i. Market price and quantity, labeled Pm and Qm and the firm’s quantity, labeled Qf. ii. The firm’s average revenue curve, labeled AR and the firm’s average total cost curve, labeled ATC. iii. The area representing total cost, shaded completely. If one firm in the market were to raise its price, what will happen to its total revenue? Explain.

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A typical profit-maximizing firm in a perfectly competitive
constant-cost industry is earning a positive economic profit. a. Is
the market price greater than, less than, or equal to the firm’s
price? Explain. b. Draw correctly labeled side-by-side graphs for
both the market and a typical firm and show each of the
following. i. Market price and quantity, labeled Pm and Qm
and the firm’s quantity, labeled Qf. ii. The firm’s average
revenue curve, labeled AR and the firm’s average total cost curve,
labeled ATC. iii. The area representing total cost, shaded
completely. If one firm in the market were to raise its price, what
will happen to its total revenue? Explain.

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