Economics Homework Seven - Model

1. Identify the four elements of perfect competition.

2. Describe how you might use competition, perhaps even competing with yourself, to motivate you to achieve more.

3. We are going to have our midterm in two weeks. Think of a question that you would like to see answered or clarified at the next class.

4. Do you think the converse of Gresham's Law is true with respect to speech and conversation, such that good speech or conversation (such as discussing the Bible) drives out bad? Explain.

5. Explain the difference between total cost, average cost, and marginal cost.

6. Suppose you decide you could profitably set the price for a homeschool dance at $15 per ticket, and it would have attracted 150 people. You also determine that 50 out of the 150 people who would have attended would have paid $20 per ticket and 10 out of the 150 would have paid $25 per ticket, and 5 out of the 150 would have paid $30 per ticket, because they would have enjoyed and benefited so much from it. However, the homeschool dance was never held because no one "got around to it." What is the loss in wealth or consumer surplus due to the fact that the event was not held?

7. Is there perfect competition between homeschooling and public schools? If not, explain the imperfections.

8. Define the term "competition" in a new way by using another powerful term developed in this course.

9. Suppose the underlying labor market is perfectly competitive, but there is a minimum wage above the market rate. Then suppose that the supply of labor increases. Explain what the result is and why.

10. What is the firm's profit or loss when Q=0 in the honors discussion above? (Answer simply in terms of another cost measure.) Is the firm profitable?

11. (Challenging, with extra credit) Prove mathematically that MC>MR for all Q>0 in the honors discussion above. (Hint: define MC in terms of the change in AVC, and then regroup the terms and draw conclusions about them to show MC>MR).