1) The world's 10 largest firms-What are their sources of economies of scale? Find the Forbes 2000 list of the world's largest firms at www.forbes.com/lists. Select three firms from three different industries and discuss the likely sources of the economies of scale that underlie their large size.
2) Two former Northwestern University students worked in an investment bank at a salary of $60,000 each for 2 years after they graduated. Together they saved $50,000. After 2 years, they decided to quit their jobs and start a business designing websites. They used the $50,000 to buy computer equipment, desks and chairs. For the enxt 2 years, they took in $40,000 in revenue each year, paid themselves $10,000 annually each, and rented an office for $18,000 per year. Prior to the investment, their $50,000 was in bonds earning an interest rate of 10%. Are they now earning economic profits? Explain your answer.
3) Do you believe that the concepts of normal and economic profit are relevant for business decision-making? Why or why not?