1. In a pure competition market, producers should produce and sell where P=MC. Why? Why couldn't they price their product above MC or wherever they want? Explain your reasons. 2. During the most recent recession General Motors and Chrysler lost huge sums of money in their operation (not counting government bailout money they could not assume they would get). How could they continue to operate at a loss? 3. You want to determine the profit-maximizing production quantity for a monopolist. You can ask the firm's consultant to draw the firm's revenue and cost curves, but each curve would cost you $1,000. From the following list indicate which curves you will request and why? a) average total cost, b) average fixed cost, c) average variable cost, d) marginal cost, e) demand, and f) marginal revenue. 4. Why do Senior citizens pay less than everyone else for admission to a movie, but pay the same as everyone else for movie-popcorn? 5. Critical Thinking: Think about this statement from a wheat farmer to the workers. "The price of wheat is low this year, and the most I can get for the crop is $35,000. If I pay you the same amount as last year ($30,000) I will lose money because I also had to pay $20,000 three months ago for seed and fertilizer. I'd be crazy to pay a total of $50,000 to harvest a crop I can sell for only $35,000. If you will work for half as much as last year ($15,000), my total cost will be $35,000 and I will break even. If you don't take a pay cut, I won't harvest the wheat." Is he bluffing? Does the farmer make economic sense? Why or why not?