Sparkle is one firm of many 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 sur-plus 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 hap-pen to the firm? What would happen to Sparkle's customers?
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