What are the assumptions of perfect competition and what do they imply about the firms’s profits in the short and long run?
b) What is the rationale for a firm under perfect competition to i) shut down? and to ii) exit? Defend your answer with an example.
c) Suppose the inverse demand function for a monopolist’s product is given by, P=12-2Q. What is the associated price and marginal revenue if the firm wishes to sell 4 units?
d) Draw a graph to show a monopolistic firm that is making zero profits. Is this an efficient price quantity combination? Why or why not? Defend your answer.
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