Chapter 3 ESQ part c)
Sort an appropriate intro!
Analysis: use diagrams to demonstrate a loss-making situation the effects of this on loss making firms andthe secondary and perhaps the effect on those left in the market.
Or use diagrams to demonstrate a firm earning of supernormal profit and the effects.
Doing both is in effect the same analysis in reverse - so no more marks!
Analyse the effect of this market structure on first Productive efficiency and next allocative efficiency (short run and or long run as appropriate for highest marks).
Evaluative discussion could consider:
The assumptions behind perfect competition
Whether firms really do aim to maximise profit
Whether the MR=MC rule is applicable in reality
Whether it is possible to ever have zero barriers to entry and exit
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