(c) Suppose now there are multiple firms with the same cost function entering the market. Solve for the competitive equilibrium price and quantity, and the deadweight loss created by the monopolist. (7 pts)

3. The following diagram illustrates a competitive firm's cost curves. MC, ATC, and AVC represent the firm's marginal costs, average total costs, and average variable costs respectively. P denotes the market price and q denotes the quantity of the good. (a) Replicate the graph in your answer sheet. Then in your graph identify (i) the profit or loss for this competitive firm and (ii) the total variable cost and (iii) total fixed costs for this firm. (6 pts)

(b) Should this firm stay open in the short-run? How about in the long-run? Explain your answer. (4 pts)

(c) What will be the long-run economic profits for the firms staying in the competitive market? How will the market supply and demand move to the long-run equilibrium? In your explanation, describe how the market price will change during the process. (5 pts)

4. Consumer Preference Suppose the above indifference map represents Dr. Bishop's preference between puddings and pancakes. (a) Explain why \(\mathrm{IC}_5\) is not a valid indifference curve in this indifference map. (2 pts)

(b) Rank the bundles A to F according to Dr. Bishop's preference. Justify your answer using the assumptions of consumer preferences and the properties of indifference curves. (4 pts)

(c) Suppose the linear solid line represents Dr. Bishop's budget constraint, identify the bundle of goods that he will choose. (2 pts)

(d) At the optimal bundle of goods that Dr. Bishop chooses, compare the marginal utilities per dollar spent on pudding to it spent on pancakes and explain your answer. (4 pts)

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