Graphically represent a competitive market that generates a price such that the typical firm in this market is making a profit (should have two diagrams side-by-side, one representing the typical firm and the other representing the market). On your diagrams, label all of the following:
- Price set in the market (P1)
- Quantity the firm will produce (QF)
- Marginal revenue (MR) of the firm
- Average revenue (AR) of the firm
- Demand facing the typical (DF)
- Shade the size of the profit made by the firm
What adjustment will occur in this market over time? How will these adjustments affect the profits of the typical firm? Show the adjustments on your graphs.
