1. What are the characteristics of a monopolistically competitive market? Give an example of a market that closely resembles monopolistic competition (make sure why you think your example is correct) explain carefully the efficiency implication of a monopolistic competitive firm. What is one benefit of this market structure? 

2. What are the characteristics of perfectly competitive markets? If the market demands in a perfectly competitive market increase (shift to the right) what happens to the number of individual firms in the market.

3. Explain how the law of diminishing return influences the shapes of shapes of the variables cost and total cost curves.

4. The government announced that it would it would introduce a carbon tax. Initially, polluters will pay $23 per of carbon they release into the atmosphere, which is equal to the external cost of emissions imposed on society.

• What is a negative externality? 

• Explain how pollution (externality in production) lead to an inefficient price and level of output. Make sure you identify and dead weight loss (DWL)

• How does the carbon tax address the inefficiency of the market identified in part B

• Who pay the higher proportion of the carbon if the supply curve is inelastic? Explain?

5.  “There are arguments both for and against Perfect Competition as a desirable market structure.” Discuss.

6.  Explain what is meant by a kinked demand curve, and outline its implications for the behavior of firms in oligopolistic markets.

7. Using the criteria of efficiency, define the ways a market may fail and explain how government regulation can offset the problems caused by market failure.