ECO 1507EM BUSINESS MICROECONOMICS ASSIGNMENT SESTER 1 2015 Microeconomics – Worth 20% of total assessment: Answer all five (5) of the following questions. Each question is worth equal marks and will be marked out of 10. The total mark is 50 and will then be converted to a make it worth 20 percent References are only required for Question 5. Question 1 Explain with the use of diagrams where appropriate how perfect competition leads to allocative productive and dynamic efficiency. (10 marks) Question 2 While firms in both the perfectly competitive structure and the monopolistically competitive structure earn zero economic profit in the long run, it can be said that perfect competition is a more efficient structure than monopolistic competition. Discuss this statement with the use of appropriate diagrams. (7 marks for explaining why firms in both market structures earn zero economic profits, 3 marks for explaining why perfect completion is more efficient.) Question 3 What is a natural monopoly? (3 marks) If a firm is a natural monopoly, illustrate with the use of diagrams why is it is necessary to have the price set by a regulatory authority rather than by the market. (7 marks) Question 4: One of the defining charateristics of an oligopoly is non-price compertion. Why is the case and how is this related to game theory scenarios such as the Prisoner’s dilemma? (10 marks) uestion 5: Attempt either Part A or Part B Part A Petro prices recently plummeted; discuss some of the reasons behind this development OR Part B Discuss the pros and cons of deregulation of university education and fees.