5) (KEY QUESTION) A small town is served by many perfectly competing supermarkets, which have constant marginal cost.

5) (KEY QUESTION) A small town is served by many perfectly competing supermarkets, which have constant marginal cost.

a. Using a diagram of the market for groceries, show the (long-run) equilibrium price and quantity.

b. Mark the deadweight loss in the picture and explain what it is.

c. Show the consumer and producer surplus in the figure, and explain what these terms mean.

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