Question: Suppose the bobby pin industry is perfectly competitive. The price of a packet of bobby pins is $2.00. Pins and Needles, inc. is a firm in this industry and is producing 1,000 packets of bobby pins per day at the point where the MC MR. The average cost of production at this output level is $1.50 per packet.

a) What is the marginal cost of the 1,000th packet?

b) Is this firm making an economic profit, a normal profit, or an economic loss? How much?

c) Is the firm in long-run equilibrium? Why or why not?