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Sparkle is one of the many firms in the market for toothpaste, which is in long-run equilibrium. a. Draw a diagram showing Sparkle’s demand curve, marginal-revenue curve, average-total-cost curve, and marginal-cost curve. Label Sparkle ' s profit-maximizing output and price. b. What is Sparkle ' s 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 Sparkle ' s customers?

BuyFind

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305156050
BuyFind

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305156050

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Chapter
Section
Chapter 16, Problem 6PA
Textbook Problem

Sparkle is one of the many firms in the market for toothpaste, which is in long-run equilibrium.

a. Draw a diagram showing Sparkle’s demand curve, marginal-revenue curve, average-total-cost curve, and marginal-cost curve. Label Sparkle's profit-maximizing output and price.

b. What is Sparkle's 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 Sparkle's customers?

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