(Answered) B.1-1: Moving toward Long-run Equilibrium: Consider a perfectly competitive industry in the diagram…

B.1-1: Moving toward Long-run Equilibrium
Consider a perfectly competitive industry in the diagram below. The left panel of the diagram depicts the industry’s aggregate supply and demand curves, currently at S
1
and D
1
, respectively. The right panel of the diagram depicts the cost curves of a typical profit-maximizing firm in this industry. Since we are dealing with long-run adjustments, all inputs are variable and, thus, the ATC curve is the same as the AVC curve.
Market Quantity, Q (in millions) Representative Firm Quantity, q (in thousands)
What is the industry’s equilibrium price and quantity? (Hint: left panel)
Answer: P* = Q* = M Units
What is the firm’s profit-maximizing output quantity, q*? (Hint: right panel)
Answer: q* = K Units
Given q*, what is firm’s total cost per unit of output?
Given q*, what is the firm’s profit per unit of output? (Include a minus sign as needed.)
What is the firm’s total profit? (Include a minus sign as needed.)
Given your answer in (5), will there be entry or exit?
Answer: