Answer Happy

Question 4: (a) Firm A is a profit-maximizing firm in a perfectly competitive industry. Assume that this firm is earning economic profits. For a given market price, draw a correctly labelled graph and show (i) marginal revenue, (ii) output, (iii) economic profits, for Firm A. (6 marks) (b) Using the information in (a), draw correctly labelled side-by-side diagrams for the industry and Firm A. (i) Considering the existence of economic profits of Firm A, show on the diagrams how the industry adjusts in the long run and explain the process that leads to the long-run equilibrium. (ii) Show on the diagrams each of the following for the industry and for Firm A in long-run equilibrium. price output (c) Explain THREE differences between perfect competition and monopolistic competition. (10 marks) (9 marks)