Assignment
Part 1
1. In a meeting about whether to store inventory in a company-owned warehouse or rent a warehouse, a colleague says, "We should use our own warehouse and save the cost of renting one." Do you agree or disagree? Explain.
2. Explain how a demand curve can be derived using utility theory.
3. Explain what causes economies of scale. Can economies of scale and diminishing marginal returns apply to the same firm? Explain.
4. Suppose you attend a meeting at work to discuss whether to change the price of your product. You think demand is elastic, but a colleague thinks it is inelastic. Does it matter whether demand is elastic or not? Explain. Is it possible that you are both right? Explain.
5. State the law of diminishing marginal utility. What does this law have to do with explaining consumer behavior? What is consumer surplus? How is consumer surplus related to the law of diminishing marginal utility?
Part 2
1. What is the golden rule of profit maximization? Explain why the rule maximizes profits. Why are economic profits zero all along a long-run supply curve in perfect competition?
2. Perfectly competitive firms are called price takers. What does this mean? Why are they price takers?
3. Most cases of price discrimination involve services rather than goods. Can you offer an explanation for this observation?
4. Discuss the types of barriers to entry, and explain whether each type is likely to provide long-term monopoly power. What are the allocative and distributive differences between monopoly and perfect competition? What causes these differences?
5. How is monopolistic competition like monopoly? How is it different?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.