Problem
1. In perfect competition, firms set price equal to marginal cost. Why isn't this possible when there are internal economies of scale?
2. It is often argued that the existence of increasing returns is a source of conflict between countries, since each country is better off if it can increase its production in those industries characterized by economies of scale. Evaluate this view in terms of both the monopolistic competition and the external economy models.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.