1. Suppose a perfectly competitive firm finds a way to reduce its fixed costs. Briefly explain whether each of the following will change for the firm. (a) average total cost, (b) profit, (c) marginal cost, (d) average variable cost.

2. Explain whether a firm earning zero economic profit will continue to produce in the long run. Include one reason to support your response. Explain how a market supply curve is derived from the supply curves of individual firms. Include one reason to support your response.

3. Describe the relationship between marginal product and marginal cost? Explain why the relationship between marginal product and marginal cost is important to a firm. Include one example to support your answer. Is this relationship the same in the long run as in the short run? Include one reason to support your answer.

4. Under normal economic circumstances, can a nation's comparative advantage change over time? What factors would make it change? Which two countries that have benefited from comparative advantage in the last 10 years. Explain two factors to support your response.

5. In comparison to the U.S. why might a lower-income country put up barriers to trade, such as tariffs on imports? Explain two reasons to support your response. Briefly explain if it is reasonable for a higher income country to place barriers to entry on intra-country trade. Include one reason with your response.

6. Under normal economic circumstances, can there be any economic gains for a country from both importing and exporting the same good, (i.e. cars)? You may use examples other than cars to explain your response.