b. Can a perfectly competitive business survive? Before a single plane was built, Boeing spent as much as $50 billion on the 787 Dreamliner. If it sells each plane at marginal cost, would it be able to recoup its investments?

i.If companies cannot recoup their investments in fixed costs, will they be able to survive?

ii.If companies that invest in fixed costs cannot survive, can we have a productive economy?

c. If practice makes perfect, do supply curve slope up? As Adam Smith had predicted, most production processes are characterized by learning by doing with increasing efficiency over time and with the experience. In the production of liberty ships during World War II, for example, the labor required to build a ship fell by as much as two thirds over less than four years because experience allowed workers and engineers to become better at building ships and to figure out better ways to organize production.

i.Draw a marginal cost curve for a firm where productivity increases with output. Do supply curve slope up for this firm?

ii.If supply curves do not slope up, will there be an equilibrium between supply and demand?