1

In 2013 and 2014, a federal judge ruled that Apple colluded with five major U.S. publishers to drive up the prices of e-books (which could be read on Apple's iPad). Apple collects a 30% commission on the price of a book from the publisher. Why would Apple want to help publishers raise their price? Given Apple's commission, what price would a book cartel want to set? (Hint: The marginal cost of an e-book is virtually zero.)

2

In a monopolistically competitive market, the government applies a specific tax of $1 per unit of output. What happens to the profit of a typical firm in this market? Does the number of firms in the market rise or fall? Why?

3

Under monopolistic competition with identical firms, is it possible for a firm to produce at the minimum of its average cost curve?