Question 1 Explain the relationship between the law of diminishing returns and the concept of economies of scale. Question 2 Explain with the use of diagrams where appropriate how perfect competition leads to allocative productive and dynamic efficiency. Question 3 Illustrate with the use of diagrams how the profit maximising price and outpur for firms in a monopolistic competitive market structure is determined. Does the fact that monopolistically competitive markets do not achieve allocative or productive efficiency mean that there is a significant loss in economic well-being to society in these markets? Question 4 What is a natural monopoly? If a firm is a natural monopoly, illustrate with the use of diagrams why is it is necessary to have the price set by a regulatory authority rather than by the market. Question 5 Petro prices recently plummeted, discuss some of the reasons behind this development.