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The table below shows the total costs faced by Allura’s Little Robotics Company for different quantities of Good S sold.

Allura’s Little Robotics Company sells Good S in a perfectly competitive market with a downward-sloping demand curve and an upward-sloping supply curve. The market price is $62
per unit.

(a) Calculate the average fixed cost of producing 2 units. Show your work.

(b) Identify the profit-maximizing quantity. Explain using marginal analysis.

(c) Calculate the economic profit at the profit-maximizing quantity you identified in part (b). Show your work.

(d) Based on your answer to part (c), will the number of firms in the industry increase, decrease, or stay the same in the long run? Explain.

(e) Based on your answer to part (c), will the market price increase, decrease, or stay the same in the long run? Explain.

(f) The income elasticity of demand for Good S is −0.5, and the cross-price elasticity of demand for toy robots with respect to the price of Good S is 0.8. Based on your answer to part (e), what will happen to the demand for toy robots? Explain.

(g) Now assume that the market in which Allura’s Little Robotics Company operates is in long-run equilibrium at a price of $65
per unit.
(i) Suppose shipping costs per order for Allura’s Little Robotics Company decrease. Will the profit-maximizing quantity of Good S for Allura’s Little Robotics Company increase, decrease, or stay the same in the short run? Explain.
(ii) Instead suppose the government imposes a price ceiling of $60
on the market for Good S. Will total economic surplus in the market for Good S increase, decrease, or stay the same in the short run as a result of the price ceiling? Explain.

The Table Below Shows The Total Costs Faced By Alluras Little Robotics Company For Different Quantities Of Good S Sold Alluras Little Robotics Company Sells Goo class=

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