Reference no: EM133082292

The Zany Florist is but one firm operating in the florist industry in Toronto, Ontario operating in pure competition. It is known that market demand is given by P = 24 - Y. Further, a large number of firms that have access to the florist industry, with identical costs given by c(y)=y?+4, where y is the individual florist's output and Y is the market output.

a) As price takers, it is known that the market price is $6 in the short run. What is the individual florist's profit maximizing level of output? For this level of output, calculate the florist profit and producer's surplus.

b) Draw the florist's MC(y), AVC(y), AC(y), and short run supply curve, clearly indicating the Zany Florist's profits.

c) Suppose any firm (who desires to enter the florist industry) can costlessly enter or exit the industry. Determine the long run competitive equilibrium price in the florist market. What will be the individual florist's output and profit? How many florists will operate in this market?

d) Should The Zany Florist exit the industry in the long run? Explain clearly in relation to what zero economic profit means in an industry with free entry and exit.