Perfect Competition Question (Baseball & Kayak Sales) - Check My Work?

Question

Here's the general overview of the question: Let's assume that the market for kayak rentals is perfectly competitive. This means that no kayak store has substantial market share and that each store offers the same kayaks. An entrepreneur can open a kayak store without worrying about government regulations (that is, there's free entry), and an existing owner can exit the market easily as well (that is, there's free exit).

The graph below shows the industry supply and demand curves for the perfectly competitive market for kayaks near the ballpark. When fans first found out about Bonds' absence back in March, the beginning of the baseball season, their demand for kayaks decreased. S1 is the initial supply curve.

Price Curves (Supply & Demand): http://courses.aplia.com/problemsetassets/micro/chung_bonds/3_static_graph.gif

Suppose that the graph below shows the marginal cost (MC) and average total cost (ATC) curves for a typical perfectly competitive kayak store.

(Check Graph Below)

Answer 1

 

    
        
        
        
            
            
        
        
            
        
    

Suppose that the graph below shows the marginal cost (MC) and average total cost (ATC) curves for a typical perfectly competitive kayak store.                           Now Barry Bonds has returned. What does this mean for the typical kayak store? (Hint: Refer to the previous question to find out the state of the kayak market.)                           If you believe that the typical kayak store earns economic profit during this time, use the blue rectangle (circle symbols) to shade the area that represents economic profit. If you believe that the typical kayak store suffers economic loss during this time, use the red rectangle (cross symbols) to shade the area that represents economic loss.