Your friend Joe wants to become a taxi driver. You agree to lend him your car.

If Joe agrees to pay you $20 for every hour he uses your car, what kind of income is that for you, and why? (12 points)

If Joe agrees to pay you 20% of any revenue he makes while driving your car, what kind of income is that for you, and why? (12 points)

If Joe gets sick and agrees to pay you $200 to drive his regulars one day, what kind of income is that for you and why? (12 points)

Joe drives 400 miles per day and makes $3/mile. Joe decides to increase his driving by 20 miles per day, but can only do so by lowering his price to $2.90/mile. What is Joe's marginal revenue per mile? If you don't change how much you charge him to use your car, will he want to increase his driving? (18 points)

If you raise your charge from $200/day to $220/day to cover maintenance expenses, will Joe want to increase his driving? Why or why not? (6 points)

2.

Why would a company keep producing if it's making zero profit in equilibrium? (10 points)

Name a productive way a company can escape zero-profit equilibrium, and explain why it creates value. (15 pts)

Name an unproductive way a company can escape zero-profit equilibrium, and explain why it doesn't create value. (15 pts)