1. (Long-Run Industry Supply) Why does the long-run industry supply curve for an increasing-cost industry slope upward? What causes the increasing costs in an increasing-cost industry?
2. Commodities like gold often trade in markets that are examples of perfect competition. Think a commodity that you believe trades in a perfectly competitive market, and describe why you believe this is so.
3. (The Short-Run Firm Supply Curve) An individual competitive firm’s short-run supply curve is the portion of its marginal cost curve that equals or rises above the average variable cost. Explain why.
4. What are the major characteristics of perfectly competitive market?
5. (Perfect Competition and Efficiency) Define productive efficiency and allocative efficiency. What conditions must be met to achieve them?