1. What type of compensation policy would you expect to observe in an industry with rapidly changing technology? Explain.

2. Suppose you are the owner-operator of a gas station in a small town. Over the past 20 years, you and your rival successfully kept prices at a very high level. You recently learned that your rival retiring and closing his station in two weeks. What should you do today?

3. What is a market failure? Explain how externalities, public goods and asymmetric information are all problems with private property rights.

4. "The government should not be sole provider of a good or service unless there is a compelling reason." What compelling reason? Would you agree that issuing drivers licenses must be left to the government?

5. What does it mean to say "Profit opportunities attarct firms like sharks to blood?

6. Suppose a firm is selling a product for less than a foreign country does in the home country and an antidumping suit forces an end to the practice. Is it possible that the result is a loss in effciency? Explain.

7. Explain why rent-seeking competition tends to dissipate rents-to drive them down so that there are no abnormal rents.