Name: ______________________________________________________________Market Supply in Competitive MarketsMonopolyHomework – Week 9Name: ______________________________________________________________Market Supply in Competitive Markets1) The following graphs represent the cost curves of a single producer of wheat and the short-term supply and demand in the market for wheat. Individual Firm MarketP P A) Plot on the graph the equilibrium quantity and the quantity produced by an individual firm.B) Plot on the graph the profit of a single firm. Does it have profit or losses?C) Is this market in its long-term equilibrium? Why?C) Show in the graph the long-run equilibrium and explain the process by which it is achieved. MCATCSDPeQqD) Suppose the wheat market is in the long-run equilibrium. Suddenly wheat becomes more popular and its demand increases. Draw a new graph below showing the initial long-run equilibrium, the new short-run equilibrium after the demand increase, and the final long-run equilibrium after the demand increase.2) For the following questions, circle the correct answers.A) A competitive firm’s short-run supply curve is its ____ cost curve above its ____ cost curve.a) average total, marginalb) average variable, marginalc) marginal, average totald) marginal, average variableB) In the long-run equilibrium of a competitive market with identical firms, what is the relationship between P, MC, and ATC?a) P > MC and P > ATCb) P > MC and P = ATCc) P = MC and P > ATCd) P = MC = ATCMonopoly1) Google is a monopolist in the search advertisement market and faces the following demand curve andcost structure:Price(Dollars)Quantity Demanded(Clicks)Total Cost(Dollars)5 0 1,000,0004 500,000 1,200,0003 1,000,000 1,800,0002 1,500,000 2,600,0001 2,000,000 3,600,0000 2,500,000 5,000,000A) Complete the following table:B) What is the price and quantity that Google will choose to maximize is profits?Quantity(Clicks)Total Revenue(Dollars)Marginal Revenue(Dollars)Marginal Cost(Dollars)Profit(Dollars)0500,0001,000,0001,500,0002,000,0002,500,0002) A monopolist, unlike a competitive firm, has market power and can raise its price, within limits, without the quantity demanded falling to zero. The main way it retains its market power is through barriers to entry – that is, other companies cannot enter the market to create competition in that industry. Complete the following table by indicating (with an X) which barrier to entry appropriately explains why a monopoly exists in each scenario.Type of Barrier to EntryExclusiveOwnership of aKey ResourceGovernment-CratedMonopoliesEconomiesof ScaleThe Aluminum Company of America (Alcoa) used to control allU.S. sources of bauxite, a key component in the production of aluminum. Since it did not sell bauxite to any other companies, Alcoa was a monopolist in the U.S. aluminum industry from the late 19th century until the 1940s.In the natural gas industry, low average total costs are obtained only through large-scale production. In other words,the initial cost of setting up all the necessary pipes and hoses makes it risky and, most likely, unprofitable for competitors to enter the market.At the national level, the Federal Communications Commission licenses only a certain number of radio and television stations in each geographic