1. Explain the maximum power of monopoly, and discuss why a monopoly must generally lower the price of all units sold!
2. What are the differences between fixed costs and variable costs. Give two specific examples to support your answer!
3. When the average income of the consumers of Good A decreased from $3,000 to $2,400, the quality demanded of Good A decreased from 160 units to 140: a. What is the income elasticity of demand for Good A? b. Is Good A a normal good or an inferior good?
4. What is the diamond-water paradox and what is its explanation?
5. List the three reasons that the division of labor increases labor productivity, according to Adam Smith.
6. Explain the difference between an explicit cost and an implicit cost.
7. What is the shutdown point? Why should a firm shut down if the price falls below the shutdown point?
8. List the three general types of barriers to entry.
9. Explain the mutual interdependence of oligopoly firms.