I see that you have a list of questions related to economics. Let's break down each question with a clear and concise answer:
1.1 Describe the term externalities:
Externalities are the unintended side effects of an economic activity that affect a third party not directly involved in the activity. These can be positive (benefits) or negative (costs) and are not reflected in the price of the goods or services traded.
1.2 What determines the optimum production level in monopolistic competition:
In monopolistic competition, the optimum production level is determined where marginal cost equals marginal revenue. This is because profit maximization occurs at the quantity where the additional cost of producing one more unit is equal to the additional revenue generated by selling that unit.
1.3 Why is the demand curve of a firm in a perfect market horizontal:
The demand curve of a firm in a perfectly competitive market is horizontal because the firm is a price taker, meaning it must accept the market price for its output. As a result, the firm can sell any quantity of output at the market price, leading to a horizontal demand curve at that price level.
1.4 How can the use of competition policy benefit consumers:
Competition policy aims to promote competition in markets by preventing anti-competitive practices. This benefits consumers by ensuring lower prices, higher quality products, innovation, and a wider variety of choices. By promoting fair competition, competition policy protects consumers from monopolistic practices that could lead to higher prices and reduced quality.
I hope this breakdown helps you understand the concepts better. If you have any more questions or need further clarification, feel free to ask!
