Commenting on the shape of the MC curve & describeing the law of dimishing returns.

1.Assume initially all firms that produce a product X in a perfectly competitive market earn normal profit. There is a drop in consumers' preference for X such that the market demand decreases.

(i) What will happen to all the firms in the short run equilibrium? describe with a suitable industry and firm diagram.

(ii) describe how would the firms adjust to the long-run equilibrium also describe with a suitable industry and firm diagram.

2.describe with the aid of a diagram why monopoly is inefficient by tperfect competition is efficient. Is it valid to say that monopoly is no good and hence the government should breaj up all monopolists and convert them into perfect competition.