Question 1. Using the concepts of marginal costs and marginal revenues, explain why economic profits are maximized where marginal revenue equals marginal cost and why profits decline if the price is above or below the profit maximizing price.
Question 2. Using the concepts of demand, supply, equilibrium, and price ceilings, explain why a shortage occurs when the price is too low (below equilibrium).
Question 3. Using the concepts of supply, demand, equilibrium, shortages, surpluses, and price, explain why "price gouging" is not possible in economic theory.
Question 4. Explain the difference between economic profits and accounting profits.
Question 5. Using the concepts of relative elasticity and relative inelasticity, explain price elasticity of demand.