Question 1: The following diagram shows the cost curves of a firm under perfect competition.
a) If this firm produces and sells 70 units, what is the total profit or loss they make?
b) At which price level will they start making a profit?
c) If this firm produces and sells 40 units, what is the total profit or loss they make?
Question 2: Assume that the discount airlines (like Air Arabia, Jazeera Airways) can be seen as substitutes for Emirates Airlines.
Using demand analysis what will happen to the demand of Emirates when the ticket prices of the discount airlines decrease.
Explain your answer and then show your result graphically. Label your axes correctly.