1. What is the most that you would be willing to pay for an Ipod if you couldn’t get them any cheaper? 1.$600 or more 2.$500 3.$450 4.$400 5.$350 6.$300 7.$250 8.$200 9. $150 10.$100 or less

2. A firm can hire labor for $50 per worker. It has no other costs. The value of its output is shown in the table below.To maximize profits, how many laborers should it hire? Number of workers Value of output 1$200 2$300 3$360 4$400 5$420 1.1 2.2 3.3 4.4 5.5

3. Why is that? Compare wage to marginal value product. Wage is $50. # laborersVal outputMVP 1$200 2$300$100 3$360$60 4$400$40 5$420$20

4. A competitive firm can sell its output at $10 per unit. The firm’s total costs are shown below. To maximize its profits how many units should it produce? OutputTotal cost 1$5 2$14 3$27 4$36 5$48 1.2 2.3 3.4 4.5 5.More than 5

5. Why is that ? For a competitive firm, producing an extra unit will increase profit if marginal cost is smaller than price and decrease profit if marginal cost is larger than price. Marginal cost of first unit $5, second unit $9, third unit $13, etc.. Price of output is $10.

6. For a monopoly that faces a downward sloping demand curve, marginal revenue from selling an extra unit is equal to the price at which it can sell that unit. 1.True 2.False

7. Why is that? Listen to today’s lecture.