Smith owns a tractor dealership and is the best sales representative of tractors in the United States. Her firm consistently earns a higher profit than any other tractor supplier in the United States. The tractor supply business is very competitive, yet Smith's dealership earns above-normal profits. Has the theory of perfect competition misled us in this case? Explain.

If a product has an income elasticity of 0.5 and income falls, what would happen to that good's share of the market?

Suppose that a firm's only variable input is labour. When the firm increases the quantity of labour employed from four to five, output rises by 2 units and total costs increase from $3,000 to $3,300.

1. What is the marginal physical product of the fifth worker?
2. What is the weekly wage of the fifth worker?
3. What does the price of output need to be in order for the firm to profit from hiring the fifth worker?