Answer questions (a) to (c):

(a)Explain briefly the adjustment process from the short-run to the long-run for amonopolistically competitivefirm.(2 marks)

(b)Explain what is meant by the "advertising trap" for a monopolistically competitive advertising firm. In your answer, explain the adjustment process from the short run to the long run when the firm invests in advertising.(3 marks)

(c)Explain the main differences between firms in a "perfectively competitive" market compared with in a "monopolistically competitive" market. In answering your question, describe the differences inthe demand curves and MR curves, and differences in theprice,marginal costs, andoutputin these respective markets? (Note: you cannot illustrate graphically so your explanation needs to be very clear.)(5 marks)