Problem 1. What four basic conditions characterize a competitve market?
Problem 2. The short-run marginal cost of the Ohio Bag Company is 2Q. Price is $100. The company operates in a competitve industry. Currently, the company is producing 40 units per period. What is the optimal short-run output? Calculate the profits that Ohio Bag is losing through suboptimal output.
Problem 3. Should a company ever produce an output if the mangers know it will lose money over the period? Explain.
Problem 4. What are economic profits? Does a firm in a competitive industtry earn long-run economic profits? Explain.
Problem 5. The Johnson Oil Company has just hired the best manager in the industry. Shoud the owners of the company anticipate economic profits? Explain.