Graph long-run equilibrium to include MC, AC, D, and MR to answers for questions 1 through 4:
1. Perfect competition
2. industry entry and exit to be relatively easy:
3. Monopolistic competition
4. Products which are identical
1. (a) Draw a simple demand curve and a simple supply curve. Label each curve and each axis. Identify the area that represents consumer surplus. Identify the area that represents producer surplus.
(b) Describe briefly in words how a price floor can cause a "deadweight loss".
(c) Define 'price discrimination' and list the three conditions that must be met for a firm to successfully practice price discrimination.
2.(a) Write in words (or in mathematical symbols) the formula for the coefficient of price elasticity of demand.
(b) What are the numbers or ranges of numbers that correspond to (1) perfectly elastic demand; (2) elastic demand?
(c) Give a realistic example of a good with perfectly elastic demand
(d) Write in words (or in mathematical symbols) the formula for the coefficient of cross elasticity of demand.
(e) Is the coefficient of cross elasticity of demand of a pair of complementary goods 'positive', 'zero', or 'negative'? (Answer with one word.)
3.(a) Define (1)cartel; (2) natural monopoly.
(b) Define: (1) rent seeking; (2)the principle of diminishing returns.
(c) Define '4-firm concentration ratio' and give one real-world example of an industry with a high 4-firm concentration ratio.