Use the following to answer question(s): Exhibit: Profit Maximizing -(Exhibit: Profit Maximizing) The exhibit shows cost curves for a firm operating in a perfectly competitive market. If the market price is P₄:

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At the given market price, the firm is producing quantity q₃ where MC=MR, which is also the profit-maximizing level of production. At this quantity, the firm is generating economic profits equal to the shaded area (P₄ - ATC) multiplied by q₃. In the long run, other firms would enter the market to take advantage of these profits. This would increase market supply, shift the market supply curve to the right, and lower the market price. As a result, the economic profits of each individual firm would be reduced to zero in the long run. However, the firm would still continue to produce the same quantity at the same price, since it is already producing at the minimum point of its ATC curve.

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