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Consider a widget industry. Each firm faces the following costs: TC = 400 + 10q +...

Consider a widget industry. Each firm faces the following costs: TC = 400 + 10q + q2. Assume that the short run costs are associated with the optimal long run firm size. For each part below graph the general relationship associated with the numerical answer.

Market Demand is known to be: Qd = 2500 - 10P
Market Supply is known to be: Qs = -500 + 50P
Quantity is measured in thousands of units and price is measured in dollars.

a. Calculate the short run producer surplus for the firm. Show how you arrived at your answer. b. Calculate the economic profit or loss facing the firm. Show how you arrived at your answer. c. Why would the answers to parts a and b differ? Explain.

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