1. Draw the marginal cost and average total cost curves for a typical firm. Explain why the curves have

the shapes that they do and why they cross where they do. [4 marks]

2. Does a competitive firms price equal its marginal cost in the short run, in the long run, or both?

Explain. [4 marks]

3. What is the law of diminishing returns and what does it imply about the shape of the firms average

variable cost and marginal cost curves [4 marks]

d. Using the table below indicate which firm has

(i) Diseconomies of scale and

(ii) Constant returns to scale over the entire range of output. Explain your answer [6 marks]

Quantity	1	2	3	4	5	6	7
Firm A	210	340	490	660	850	1060	1290
Firm B	180	350	510	660	800	930	1050
Firm C	120	250	390	540	700	870	1050
Firm D	150	300	450	600	750	900	1050