1. If, at every price, the perfectly competitive retail sellers of Granny Hashish Cookies are willing and able to sell more cookies than previously and, at every price, the consumers of Granny Hashish Cookies are willing and able to buy more cookies than previously, how might the equilibrium price and equilibrium quantity change in this market? Explain.

a. "The principle of diminishing returns to production implies a principle of increasing costs of production." Discuss the reasoning behind this statement.

b. How does the monopolistically competitive market structure differ from the perfectly competitive market structure? How is it similar? Why is the perfectly competitive market structure considered to be superior to the monopolistically competitive market structure? Explain.

c. What is meant by the 'Universal Economic Problem'? Carefully explain the significance of this problem in neoclassical microeconomics.

d. Carefully explain why, and under what assumptions, it is thought that profit-maximizing behavior on the part of enterprises will lead to the efficient production of commodities.

e. "The income effect of a wage decrease will induce a household to increase its amount of leisure foregone; whereas the substitution effect of a wage decrease will induce a household to decrease its amount of leisure foregone." Explain.