Three college students consider the option of forming a lawn care and landscaping business during their summer vacation. They estimate the following costs:

Insurance$ 3,300 for the summer

Equipment Rental Fees$ 1,500 for the summer

Fuel and Supplies$ 5 per lawn

Miscellaneous Expenses$ 2 per lawn

Their projected revenue depends on the number of lawns serviced. The price per job is $50. The going wage for a typical unskilled college student is about $4,500 for the summer months. Realistically, the small business should expect to service about 300 lawn jobs during the summer. Should the three students launch the business? Why or why not?

2.Can a scenario where firms are earning economic profits be maintained in the long run in a perfectly competitive market? Carefully explain your answer.

3.A pharmaceutical company faces the following demand function for one of its products in the American market:

QA= 300,000 - 5,000PA

where QAis the number of prescriptions sold in the American market annually and PAis the price per prescription. The firm's annual total cost function is:

CA= $1,000,000 + $2 QA

The company is considering also entering the Brazilian market where the demand for the pharmaceutical is:

QB= 240,000 - 8,000PB

where QBis the number of prescriptions sold in the Brazilian market annually and PBis the price per prescription. The cost function for the Brazilian market is:

CB= $1,000,000 + $2QB

a) Calculate the firm's optimal price in the US. Show your work. (20 points)

b) What is the optimal price to charge in the Brazilian market? Show your work. (20 points)

c) Now suppose that the interest rate in the U.S. is increasing relative to other countries, what do you expect to happen to the exchange rate of the US dollar? What effect would this have on the demand in the Brazilian market and revenues from the Brazilian market? (Note: Production will occur in the U.S.) (20 points)