Cost and Price X PP number of firms The figure above represents a monopolistically competitive market. The PP curve represents the pricing behavior of firms which depends on the mark-up over marginal cost. The CC curve represents average cost. Answer the following questions in the same order: 1. In the figure above, why is the CC curve is upward sloping ? (2 sentences max) ii. In the figure above, why is the PP curve is downward sloping ? (2 sentences max) iii. If there are n1 firms in the market what is the relationship between price and average cost (larger smaller, equal?) iv. Describe equilibrium in this model in terms of average cost price, number of firms, entry and exit. (2 sentences max) V. In the above figure, how would you represent the effect of international trade ?(Shifting which curve in which direction?) vi. What is the effect of international trade on this industry in terms of equilibrium price, average cost and number of firms