Sketch the following demand and supply curves that represent the entire market for some product that is perfectly competitive: Demand is given by P=15-Q and supply is given by P=3+Q. This means the demand curve stretches from the points (0,15) to (15, 0) and the supply curve is a ray emanating from (0,3) with slope of 1 crossing the demand curve at the point (6, 9).
a. Compute the profits of an individual firm in this market that optimally produces a quantity of 120 units and faces average total costs of $6 and average variable costs of $3.
b. What do we expect to happen in this market in long run?
Hint: Draw two graphs side-by-side: On the left side, sketch a representation of the market equilibrium (i.e. supply, demand, market equilibrium quantity and market equilibrium price). On the right side, sketch a representation of the individual competitive firm's cost curves (I haven't provided much information about the actual shape, but draw something consistent with the given data). Make sure the market equilibrium price determined in your leftmost graph appears in your rightmost graph: Each individual firm takes the market price as given!