1. Suppose you attend a meeting at work to discuss whether to change the price of your product. You think demand is elastic, but a colleague thinks it is inelastic. Does it matter whether demand is elastic or not? Explain. Is it possible that you are both right? Explain.
2. In a meeting about whether to store inventory in a company-owned warehouse or rent a warehouse, a colleague says, "We should use our own warehouse and save the cost of renting one." Do you agree or disagree? Explain.
3. Explain what causes economies of scale. Can economies of scale and diminishing marginal returns apply to the same firm? Explain.
4. State the law of diminishing marginal utility. What does this law have to do with explaining consumer behavior? What is consumer surplus? How is consumer surplus related to the law of diminishing marginal utility?
5. Explain why demand is more elastic in the long run than in the short run.