(a) Draw two models, a monopoly market (price-setters) and a perfectly competitive market (price-takers). On each of your models show the equilibrium point and show any areas of consumer surplus, producer surplus and deadweight loss. Label all relevant axes, points and curves on your model.

(b) Discuss how important investment in research and development would be in each type of market structure, namely monopoly and perfectly competitive

(c) What are the assumptions of perfect competition? Do these assumptions make the model very unrealistic? If so, why do we use this model?