Question 1: Suppose a firm is currently maximizing its profits by producing 100 units of output. Also assume thatthis firm only uses Capital and Labor in its production process.

If the price of labor were to increase and if the firm wanted to continue to produce 100 units of output, what would you expect this firm to do in the long run? Explain using the relevant economic conceptsand terminology.

Question 2: Provide an explanation for the long-run average total cost curve. I.e. what does the curve represent with respect to the average cost of production?

Question 3: A) Under what conditions is a market be considered perfectly competitive?

B) Provide an explanation for the demand curve of an individual firm in a perfectly competitive market.