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Question 2 The main reason why inefficiency occurs is profit. Perfectly competitive firms are efficient because they are making zero profit in the long run.

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Question 2 "The main reason why inefficiency occurs is profit. Perfectly competitive firms are efficient because they are making zero profit in the long run. If the government can impose regulation to make a monopolist earns zero profit, the monopolist can also be efficient". Discuss the validity of this statement with suitable diagrams for a perfectly competitive firm and a monopolist. (40 marks)

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