5. Make three copies of the following diagram and label them (i), (ii) and (iii). Add three different residual demand curves faced by a monopolist: (i) very steep (inelastic), (ii) relatively flat (elastic), and (iii) horizontal (perfectly elastic). Draw the residual demand such that a monopolist earns zero economic profit.

a. Which sketch corresponds to a firm that faces perfect competition?

b. Which sketch, without actually representing perfect competition, is close to perfect competition in terms of the price and quantity?

c. Using your diagrams, explain how “perfect competition” is a special case of “monopolistic competition.”