4. Economists believe that competition promotes efficiency and that withoutcompetition, costs rise and resources are wasted.

a. Discuss the perfectly competitive model. What assumptions are made about the firms in the industry, the ease of entry and exit into the market and the degree of product specialization?

b. It can be argued that when unit costs are too high, i.e. when unit costs of production are greater than minimum average cost, national output is less than what could be produced if firms were efficient. Explain why this is so.