1. Based on your own experience, describe a business that is quite competitive. What good or service is produced Which of the criteria for a perfectly competitive firm are met by this businessand which are not? (Identical products; price taker; low economic profits)

For this business give examples (description of the cost; no dollar amount needed) of the following and explain why they are examples of this type of cost

Explicit fixed cost

Explicit variable cost

Implicit fixed cost

Implicit variable cost

2. A friend says she is worried about her small, individually-owned business advising new parents with personal phone calls. Taking into account her implicit costs such as her own time and investment (she has studied economics!) she realizes she is operating at a loss. She says she can't raise prices because other firms already charge this low price and the business is quite price elastic (again she has studied economics.) . What she asks you is: should she simply cut off the phone number today? Or, should she wait to do so? What do you tell her?