Part B: Short Answer

1. Explain how the long run differs from the short run in pure competition.

2.How does a generic drug differ from its brandname, previously patented equivalent? Explain why the price of a brandname drug typically declines when an equivalent generic drug becomes available? Explain how that drop in price affects allocative efficiency.

3. Using diagrams for both the industry and a representative firm, illustrate compe

titive longrun equilibrium. Assuming constant costs, employ these diagrams to show how (a) an increase and (b) a decrease in market demand will upset that longrun equilibrium. Trace graphically and describe verbally the adjustment processes by which longrun equilibrium is restored.

4.Refer to Q3, now rework your analysis for increasingand decreasingcost industries and compare the three longrun supply curves.