Sparkle is one firm of many in the market for tooth-paste,

Chapter , Problem 6

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Sparkle is one firm of many in the market for tooth-paste, which is in long-run equilibrium.a.Draw a diagram showing Sparkles demand curve, marginal-revenue curve, average-total-cost curve, and marginal-cost curve. Label Sparkles profit-maximizing output and price.b.What is Sparkles profit? Explain.c.On your diagram, show the consumer surplus derived from the purchase of Sparkle toothpaste. Also show the deadweight loss relative to the efficient level of output.d.If the government forced Sparkle to produce the efficient level of output, what would happen to the firm? What would happen to Sparkles customers?

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