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Answer all four questions. For each question write a maximum of
500 words. Each question is worth 25% of the total mark for the
coursework. Word count: 800-900Diagrams are mandatory for each question.harvard referencing style ” NO PLAGIARISM”Q’s:1. Using supply and demand diagrams show the
effects of the following changes on the price and
quantity of cars: a) an increase in the price of petrol; b) a rise in incomes; c) a rise in wages for car workers and a fall in the price
of bus tickets (both at the same time). In each case, explain the assumptions you are making
about how the changes affect supply or demand.
2. Explain, using a diagram (or diagrams), why firms
maximize profits where marginal cost equals marginal
revenue.
3. Draw a diagram to show a competitive firmās shortrun production decision. Use the diagram to explain
why, in the short run, a firm in a perfectly competitive
industry may continue to produce when it makes a
loss. 4. Draw a diagram to show the difference in output
and price between a perfectly competitive market and
monopoly. Explain why monopoly results in a welfare
loss compared to a perfectly competitive market.
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