A perfectly competitive firm is currently maximizing profits. Market demand for the firm's production increases. Briefly summarize what happens in the market.
Describe what will happen to this firm's production (and most importantly why) as a result of that change. Describe what will happen and why to the firm's average fixed costs, marginal costs, average costs, and profits as the firm makes its choices. Emphasize why each type of individual cost does or does not change as the firm changes its level of production. Explain your reasoning. Focus on the reasoning as to why the changes in costs and production occur. That is, why was the firm producing where it was producing, why does the firm change its output, and then why do costs change as a result of the change in output. End with why the firm stops changing its production (You do not need to explain the logic of why the market price and quantity may or may not change, just summarize. Focus on the decision-making of a typical firm in the short run. Focus on your logic. Show it in your explanation.)