Q1. List out the four assumptions for the Monopolistic competition model?
Q2. Draw a diagram which shows a representative firm in a monopolistically competitive market which is experiencing short-run economic profits. Label the regions that represent the total revenue, total costs and the profit. (For simplicity, only draw the average total cost curve; you require not draw the average variable cost curve.)
Q3. Now describe how the market will adjust in the long run and draw a corresponding graph for the representative firm in long run. (Describe your answer).