2) Why is the unrestricted entry of new firms to all markets necessary to assure the efficient allocation of resources in the long run?
5) Explain why different distributions of income in an economy might well imply different "efficient" patterns of resource allocation
6) In what sense do monopolistic-competitive markets lead to an inefficient allocation of resources? Do you think consumers' economic welfare would be increased if there were fewer competitors in monopolistic competitive markets? Explain.
8a) What is the justification for regulating the behavior of a "natural" monopoly?
8b) Why do regulated utilities (electric company, local phone service etc.) often have a rate structure which includes both a fixed monthly fee and a per-unit usage charge?
These solutions may offer step-by-step problem-solving explanations or good writing examples that include modern styles of formatting and construction of bibliographies out of text citations and references. Students may use these solutions for personal skill-building and practice. Unethical use is strictly forbidden.1) We know that firms maximize their profits when MC = MR which is suitable for all the firms in any market structure. However for the perfectly competitive firm, since MR=AR= Price of the product, we can say that at equilibrium whether it is in short run or in the long run, the condition that MC equals Price (or AR) at the equilibrium ensures that there is allocative efficiency and that the...
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