1) Consider a firm that has just built a plant, which cost $20,000. Each worker costs $5.00 per hour. Based on this information, fill in the table below.
2) Describe the process by which the competitive market establishes a price at which all firms are just earning normal profits.
3) Convenience stores with gas stations tend to sell an essentially identical variety of products and services. Yet this is generally considered to be a monopolistically competitive industry selling differentiated products.
How can this be considered a differentiated product?
4) McDonald's charges a higher price for a Big Mac in New York City than it does in a small town in Iowa. Is this an example of third-degree price discrimination? Explain.
5) Professor Rush decided to quit teaching economics and opens a shoe store out at the mall. He gave up an annual income of $50,000 to open the store. A year after opening the shoe store, the total revenue for the year was $200,000. Rush's expenses were $30,000 for labor, rent was $18,000, and utilities were $1,200. He also had to purchase new shoes from manufacturers, at a cost of $60,000, which was financed by cashing in his savings of $60,000 that had been in a bank earning 8 percent per year. The normal profit from operating a shoe store in the mall is $20,000. Determine Professor Rush's explicit costs, implicit costs, and economic profit.
6) "Because firms in an oligopoly are so large, they do not need to consider each other's actions." Is the previous statement correct or incorrect? Explain your answer.