1. What is the distinction between the short run and the long run? In reality, does a company operate in the short run or in the long run? How do you know? Is it a reasonable distinction to have for a company?

2. With respect to profit and loss, what is the economic goal of business? How does Maximizing profits accomplish that goal? What should, in your opinion, be the goal of a business?

3. Identify Three kind of industries would fit into the Perfect Competition industry? Justify why you would classify each one of the industries into Perfect competition.

4. What happens in the long run to the existing companies in the industry? To the New companies in the industry and to the Industry as a whole? What will happen to the price and average costs in the long run?

5. If the MC is greater than the ATC, and the MC is increasing, then what will happen to the ATC and the AVC? If the MC is less than the ATC and the MC is decreasing, then what will happen to the ATC and AVC? Explain.

6. What are economic profits? How is it different than accounting profits? Should there be a difference? How do businesses make those types of profits?

7. Is it true that a company in a perfect competition industry will have a perfectly elastic demand and supply? Why or why not?

8. Why do the long run average costs decline first and then become to rise? Is this pattern observed in the real world? Can you give examples of this?