(a) (i) What is the decision rule for a firm 'not to produce', if it is experiencing an economic loss in the short run? Discuss your answer in a few sentences why.

(ii) What 'market structures' does this decision rule apply to? Provide an economics rationale for your answer and discuss briefly.

(b) For each firm operating in a perfectly competitive market, what is the nature of price elasticity of demand? Explain why in one sentence.

(c) (i) Suppose that the firms in a perfectly competitive market are experiencing an economic loss in the short run, due to an unexpected change in the market. What is the expected outcome in relation to profits or losses in the long run in this case? Describe the main characteristics and mechanisms in the perfectly competitive market structure that are expected to result in the outcome you have noted.

(ii) Support your answer for Part (c)(i) by drawing two diagrams (one for the overall industry, and one the representative firm). On these diagrams show both the short-run and the long-run effects on the equilibrium price and output at the industry level, and the effects on the demand, costs and economic profit or loss for the representative firm.