Say that a producer operates in a perfectly competitive industry and is motivated by profit. Their marginal cost of production is given by MC = 5 + 3Q, they choose to produce 15 units of output, and they make positive economic profit. a) What must the price of output be in this industry? How do you know?

b) Sketch a diagram showing marginal cost and price. Although we don’t have enough information to pin down exactly what average cost looks like, sketch an example of an average cost curve that would be consistent with the information given in the question.

c) According to the assumptions of the perfectly competitive model, what would we expect to happen in this industry in the long run and why?