1) In side-by-side diagrams illustrate two perfectly competitive firms in long-run equilibrium where the firms have identical AC but the firm on the right has higher fixed costs. Using these diagrams illustrate and explain which firm: left (low fixed costs) or right (high fixed costs) is more likely to survive if the long-run equilibrium is interrupted by a severe recession.

2) Consider a monopoly with an upward sloping marginal cost curve. What is the effect of an increase in marginal cost on the monopolist's price? What is the effect on the monopolist's revenue?