B: Theory: Market power Terminology: diminishing returns to scale (DRS), constant returns (CRS), increasing returns (IRS) 3. A firm with positive fixed costs encounters CRS and then DRS as it expands production. Show the firm's marginal costs, average variable costs, and average costs in a suitably labelled graph. (careful...) 4. We are in a perfectly competitive market, in which all firms are identical. Market demand is downward sloping. a. Draw the market supply, demand, and equilibrium. b. At present, our firm is producing new widgets for £1.15 and the market price is £2. Is the firm maximising profits? Is the firm in profit or loss?

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Can you help me to draw a graph for question 5 please? Thanks

B: Theory: Market power
Terminology: diminishing returns to scale (DRS), constant returns (CRS), increasing returns (IRS)
3. A firm with positive fixed costs encounters CRS and then DRS as it expands production. Show
the firm's marginal costs, average variable costs, and average costs in a suitably labelled
graph. (careful...)
4. We are in a perfectly competitive market, in which all firms are identical. Market demand is
downward sloping.
a. Draw the market supply, demand, and equilibrium.
b.
At present, our firm is producing new widgets for £1.15 and the market price is £2. Is
the firm maximising profits? Is the firm in profit or loss?
5. Our firm is now a monopolist facing the same downward-sloping demand curve. What
happens to price and quantity produced? Explain.
Transcribed Image Text:B: Theory: Market power Terminology: diminishing returns to scale (DRS), constant returns (CRS), increasing returns (IRS) 3. A firm with positive fixed costs encounters CRS and then DRS as it expands production. Show the firm's marginal costs, average variable costs, and average costs in a suitably labelled graph. (careful...) 4. We are in a perfectly competitive market, in which all firms are identical. Market demand is downward sloping. a. Draw the market supply, demand, and equilibrium. b. At present, our firm is producing new widgets for £1.15 and the market price is £2. Is the firm maximising profits? Is the firm in profit or loss? 5. Our firm is now a monopolist facing the same downward-sloping demand curve. What happens to price and quantity produced? Explain.
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