Answer all three questions illustrated below:
Question 1. Discuss short and long run costs. For the short run discuss the relationship between cost theory and production theory and the concept of diminishing returns --- what is diminishing returns and how does it shape production and cost curves. Then, discuss the relationship between short run cost curves and long run cost curves. Finally discuss the concept of economics of scale and how long run costs curves shape the economic structure of industries.
Question 2. Define the economic characteristics of the market structures (Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly). Select ONE of the market structures and show how we can predict the short run and long run profit maximizing equilibrium positions with respect to quantity produced, price, total costs, total revenues and profits.
Question 3. How do markets determine the payments to the various factors of production and determine the distribution of income? Explain.