1. Equilibrium? in your city there are currently three firms providing oil changes. For each firm, there is a fixed cost $80.00 per day and a marginal cost of $12 per oil change each firm currently maximized its profit by providing 10 oil changes per day.

a) For Each firm, Marginal revenue = _____________

b) This is a monopolistically competitive equilibrium if price equals = ____________

(show how to calculate)

2. A Long run equilibrium in a monopolistically competitive market satisfies the following two conditions:  a) Average revenue equals Average Cost  or b) marginal revenue equals marginal cost

3. When a product is differentiated by location, the entry of firms generate benefits for consumers in the form of a) Lower travel cost b) greater variety

4. Word-of-Mouth Book Sales. Consider a publisher who earns a profit of $1 per book sold. An advertisement that cost $340,000 would sell 100,000 books directly.

To make the advertisement worthwhile, how many of the original buyers must each persuade just one other person to buy the book? _____ (response as an integer)

Please show how to calculate all answers