Q1. You are given the following information for a producer of organic grommets in a perfectly competitive market.

TFC = $7 Market price = $16

Quantity	MC $
1	11
2	9
3	10
4	12
5	15
6	19

The marginal cost of production appears in the table above. What is the profit-maximizing output? Is the firm making a profit or loss? How much?

Q2. You are given the following cost and revenue data for Parkin's Pickles, a perfectly competitive firm at its current output level.

TR = $1,425 TFC = $380 MC = $12

AFC = $4 AVC = $6

Is the firm making a profit or a loss? How much?

Q3. Briefly state three basic characteristics of perfect competition and monopolistic competition.

Q4. What would be true if the marginal social benefit (MSB) of a product exceeded its marginal private benefit (MPB)? How might the government respond to this situation?

Q5. The following graph depicts the costs and revenues for an unregulated monopolist:

Moondance Stick to agreement Cheat on agreement Cell A Cell B Stick to Moondance: Moondance: agreement Sundance: Sundance: Sundance Cell C Cell D Cheat on Moondance: Moondance: agreement Sundance: Sundance