1) Suppose a production requires only capital, and no labor. Capital costs $20 per unit, and labor costs $10 per unit. Draw a representative isoquant and isocost curve, plotting labor (L) on the x-axis and capital (K) on the y-axis.

2) Suppose the market for wheat is perfectly competitive. Suppose further the long-run supply curve in this market is increasing. Explain briefly if and how each of the following varies as market quantity increases:

i) The number of firms

ii) Input prices

iii)Long-run profits

3)Suppose two firms compete with each other in Bertrand fashion, but they have different cost functions: one firm has a total cost of TC = 10 q (and hence mc = 10 ) and the other firm has a total cost of TC = 5 q (and hence mc = 5 ). Market demand is given by QD=20-P. What will be each firm's profit in this scenario?

4) Suppose firms in a monopolistically competitive market produce their profit-maximizing quantity, and their average total cost equals their marginal revenue. Do you expect entry or exit in the long run?