All exercises are available on MyEconLab; *=answer appears at the back of this book; M=mathematical problem.

1. Perfect Competition

  1. 1.1 A large city has nearly 500 restaurants, with new ones entering regularly as the population grows. The city decides to limit the number of restaurant licenses to 500. Which characteristics of this market are consistent with perfect competition and which are not? Is this restaurant market likely to be nearly perfectly competitive? Explain your answer.

  2. 1.2 Why would high transaction costs or imperfect information tend to prevent price-taking behavior?

  3. 1.3 Based on Roberts and Schlenker (2013), the corn demand elasticity is ε=0.3,[&|eps||=||minus|0.3,&] and the supply elasticity is η=0.15.[&|eta||=|0.15.&] ...

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