Question: Consider a market for online move rentals. The market supply curve slopes upward, the market demand curve slopes downward, and the equilibrium rental price equals $3.50. Consider each of the following events, and discuss the effects they will have on the market clearing price and on the demand curve faced by the individual online rental firm.

a. People's tastes change in favor going to see more movies at cinemas with their friends and family members.

b. More online movie-rental firms enter the market.

c. There is significant increase in the price to consumers of purchasing movies online.

Question: Yesterday, a perfectly competitive producer of construction bricks manufactured and sold 10,000 bricks per week at a market price that was just equal to the minimum average variable cost of producing each brick. Today, all firm's costs are the same, but the market price of bricks has declined.

a. Assuming that this firm has positive fixed costs, did the firm earn economic profits, economic losses, or zero economic profits yesterday?

b. To maximize economic profits today, how many bricks should this firm produce today?

Question: The marginal revenue curve of a monopoly crosses its marginal cost curve at $30 per unit and an output at 2 million units. The price that consumers are willing to pay for this output is $40 per unit. If it produces this output, the firm's average total cost is $43 per unit, and its average fixed cost is $8 per unit. What is the profitmaximizing (loss-minimizing) output? What are the firm's economic profits (or economic losses)?

For each of the following examples, explain how and why a monopoly would try to price discriminate. (see pages 545-546).

a. Air transport for businesspeople and tourists

b. Serving food on weekdays to businesspeople and retired people.

Hint: Which group has more flexibility during weekday to adjust to a price change and, hence, a higher price elasticity of demand?

Question: Demand has fallen. What is likely to happen to the monolpolist' price, output rate, and economic profits? (see pages 541-544).