the normal rate of return equal to zero

1. Consider the following firms and/or organizations. Consider the markets these firms compete in and organize them from most competitive to least competitive.

Provide a sentence or two of justification for each:

Major League Baseball, National Football League, American Medical Association, Toyota, Pomona College, Trader Joe’s, Southern California Edison, Student Tutors

2. Why is the normal rate of return equal to zero? Why is this state the predicted long run outcome for all firms in perfectly competitive and monopolistically

competitive markets?

3. Use a graph to show why the profit maximizing level of output occurs where MR=MC and MC is increasing. Provide a paragraph of explanation with your diagram.

4. Bob, Bill, Ben and Brad Baxter have just made a documentary movie about their basketball team. They are thinking about making the movie available for download and

they can act as a single-price monopolist if they choose to. Each time the movie is downloaded, the internet service provider charges them a fee of $4. The brothers

are arguing about which price to charge customers per download. The accompanying table shows the demand schedule for their film:

Price in $ Quantity of downloads

10 0

8 1

6 3

4 6

2 10

0 15

a. calculate the total revenue and the marginal revenue per download

b. Bob is proud of the film and wants as many people as possible to download it. Which price would he choose? How many downloads would be sold?

c. Bill wants as much total revenue as possible. Which price would he choose? How many downloads would be sold?

d. Ben wants to maximize profit. Which price would he choose? How many downloads would be sold?

e. Brad wants to charge the efficient (competitive) price. Which price would he choose? How many downloads would be sold?