1. Which types of firms would normally maximize profits along with real-life examples?
2. A producer of ballpoint pens has been purchasing ink from an ink supplier and is considering acquiring the ink supplier. Would the pen company be more or less likely to vertically integrate by buying the ink manufacturer if the government taxes ink? Please explain.
3. A large city has nearly 500 restaurants, with new ones entering regularly as the population grows. The city decides to limit the number of restaurant licenses to 500. Which characteristics of this market are consistent with perfect competition and which are not? Is this restaurant market likely to be near perfectly competitive? Why? Are national restaurant franchised chains, perfectly competitive market structures? Restaurants with dress codes, are they considered to be perfectly competitive market structures as well?
4. BMW of Colorado advertises on the radio that it has been owned and operated by the same family and in the same location for over 30 years. It then makes two claims: first, that is has lower overhead than other nearby auto dealers because it has owned the land for the past 30 years, and second, it charges a lower price for its cars because of its lower overhead. Discuss the logic of these claims.
5. The "Upward-Sloping Long-Run Supply Curve for Cotton" Mini-Case shows a supply curve for cotton. Discuss the equilibrium if the world demand curve crosses this supply curve in either (a) a flat section labeled Brazil or (b) the following vertical section. What do cotton farmers in the United States do?