1. An individual competitive firm's short-run supply curve is the portion of its marginal cost curve that equals or rises above the average variable cost. Explain why.

2. If all the assumptions of perfect competition hold, why would firms in such an industry have little incentive to carry out technological change or much research and development? What conditions would encourage research and development in competitive industries?

3. Describe the demand and marginal revenue curves faced by a firm in a purely competitive market. Are they different from those faced by a firm in oligopolistic competition? If so, why?

4. Although there is relatively little difference in the cost of producing hardcover and paperback books, these books sell for very different prices. Explain this pricing behavior.

5. An emissions fee is paid to the government, whereas an injurer, who issued and held liable, pays damages directly to the party harmed by an externality. What differences in the behavior of victims might you expect to arise under these two arrangements?