1.) What types of products are phone services and electricity?
2.) Why does a firm spend an enormous amount on advertising when the ads provide consumers virtually no information? For instance, what does the advertisement showing the Rock of Gibraltar and suggesting that we should "own a piece of the rock" tell us?
3.) Why do consumers pay twice as much for Bayer aspirin than for generic aspirin when they know that the two are chemically identical?
4.) What does it mean to say that a firm should devote resources to an activity as long as society values that activity more than its values the resources allocated to that activity?
5.) Using the following Marginal Revenue and Marginal Cost, determine the profit maximizing price and quantity:
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OutputMCMR
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0 0 0
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1 $30 $80
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2 $50 $80
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3 $80 $80
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4 $120 $80
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5 $170 $80
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6.) Explain why the rule MR= MC defines profit maximization.
7.) How long has Wal-Mart made positive economic profits? How long has Starbucks earned positive economic profits? Has entrepreneurs been able to innovate and otherwise compete with Wal-Mart and Starbucks?