Required to do:
Question 1. You've been hired by an unprofitable firm to determine whether it should shut down its operation. The firm currently uses 70 workers to produce 300 units of output per day. The daily wage (per worker) is $100, and the price of the firm's output is $30. The cost of other variable inputs is $500 per day. Although you don't know the firm's fixed cost, you know that it is high enough that the firm's total costs exceed its total revenue. You know that the marginal cost of the last unit is $30. Should the firm continue to operate at a loss? Carefully explain your answer.
Question 2. How is a monopolistically competitive industry like perfect competition? How is it like monopoly?
Question 3. In the Sunday newspaper, there are usually coupons that you can clip and take to the store to save money on products. Anyone can buy a newspaper, and the value of the coupons easily exceeds the price of the newspaper for most consumers. Is this an example of price discrimination? Explain
Question 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.
Question 5. When one automaker begins offering low cost financing or rebates, others tend to do the same. Can you offer an explanation of this behavior?