Q4) Answer the following, providing a graphical illustration along with your answer where necessary:
a) What is the profit maximising condition in a market with perfect competition?
b) Explain what is meant by abnormal profit? What is the adjustment process from short-run
abnormal profit to long-run equilibrium in a perfectly competitive market?
c) Please find below Pricing options for firm A and B, along with individual payoffs (Firm A's payoff/
Firm B's payoff)
Firm A
Price £2
Firm B
Price £2
Price £1
£20,000/£20,000
£10,000/£24,000
Price £1
£24,000/£10,000 £12,000/£12,000
