Small businesses/firms in a particular industry/market (such as cafs, restaurants, and barbers/hairdressers) make positive short-run economic profits but tend to break even (i.e. make zero economic profit) in the long run.

PART A:What is the name of this type of industry/market? Outline the characteristics of this industry/market.[3 marks]

PART B:Explain why a business/firm in this industry/market makes a positive economic profit in the short run. Illustrate your answer with a real-life example.[6 marks]

PART C:Explain why the business/firm discussed in part (b) would break even (i.e. make zero economic profit) in the long run.[6 marks]

PART D:Briefly compare the long-run outcomes of this firm with the long-run outcomes of a firm operating in a competitive industry/market. You may focus your answer on the following outcomes: output, price, excess capacity, and efficiency.[5 marks]