# Economics - Economics Section 1

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• Option : B
• Explanation : The demand schedule faced by a firm is horizontal, while the demand schedule faced by the market as a whole is downward sloping.

• Option : A
• Explanation : The firm is selling at \$25 and the average total cost is \$15. The firm is making a profit of \$10 per unit. This will result in a total profit of \$10,000.

 Total cost 243 + 3Q + 6Q² Average cost 243/Q + 3 + 6Q Marginal cost 3 + 9Q

• Option : C
• Explanation : The long-run competitive equilibrium occurs where
MC = AC = P for each company.
By equating MC and AC, 3 + 9Q = 243/Q + 3 + 6Q
3Q + 9Q² = 243 + 3Q + 6Q²
3Q² = 243, Q = 9
The equilibrium price can be found by using the following equation: P = 3 + 9Q = 84.
Any price above 84 yields an economic profit because P = MC > AC, so new companies will enter the market. Note that the demand curve for< the market is not needed for this problem.

• Option : C
• Explanation : Under perfect competition, the supply function is well defined and is equal to the marginal cost schedule of the firm.