Question 1:
A) In a competitive market place (pure competition) is it possible to continually sell your product at a price above the average cost of production? Why or why not?
B) Why do marginal and average cost curves take a "U" shape?
Question 2:
Define "Monopoly". Is it true that a monopolist will maximize profit where Marginal Revenue equals the Average Cost of Production? Why or why not?
Question 3:
Define Elasticity. If you have a product where elasticity is less than one, what does that mean? Is it good, bad for the firm?
Question 4:
Why will firms not shut down as soon as the price of their product drops below the Marginal cost? At what point will most firms go out of business (shut-down) and why?