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Question 2

This question has two parts. Answer them all.

Part One:

Explain why the following statements are incorrect.

(i) Monopolistic competitors notonly can earn economic profits in the short-run, but they can also earn a huge profit in the long-run even if the industry becomes very competitive. (3 marks)

(ii) In theory, accounting costs are higher than economic costs. (2 marks)

Part Two:

The table below shows Firm A's quantity, price and the marginal cost of its product.

Table 1. Firm A's quantity, price and marginal cost.

Referring to Table 1 above