Exercise 8 1. Explain the diagram below using the different prices from P1 to P5. Describe the situation in each given price, points A to E. MC E ATC P5 P4 AVC P3 P2 P1 Q1 Q2 Q3 04 05 Quantity Supplied 2. Using diagrams, discuss the price determination of the firms in the pure competitive. 3. Draw a diagram that shows profit maximization of purely competitive firm, then discuss. 4. Draw a diagram of a purely competitive firm that shows losses. Then discuss your diagram. 5. Discuss how entry of firms eliminates economic profit in the pure competition. You can use diagrams for better illustration. 6. Discuss how exit of firms eliminates economic losses in the pure competition. You can use diagrams for better illustration. 7. Using the long-run equilibrium of pure competition, discuss the concept of productive efficiency and allocation efficiency. 8. Using the Total Revenue Curve and Demand Curve of a monopolist, discuss why monopolist sets its price at the elastic region of demand. 9. Discuss the profit maximization situation of the monopolist. (You can use diagram for better discussion.) 10. Using the profit maximization diagram of a monopoly, discuss the concept of productive efficiency and allocation efficiency