1. An entrepreneur is thinking of starting a firm. The firm will pay Tk. 320,000 in wages/salary, Tk. 150,000 on raw materials, Tk. 100,000 for rent per month. If the entrepreneur worked as a manager for somebody else, he would earn Tk. 50,000 per month. The firms total revenue per month is Tk. 600,000.

a) Calculate the accounting profit of this firm. b) Do you think the entrepreneur should start this firm, explain your answer.

2. List the characteristics of the four different types of market structures discussed in class and give an example of each.

3. Suppose you start a business of manufacturing computer software. Assume that this computer software company is a perfectly competitive firm. Your fixed cost per month is Tk. 60,000 and total cost is Tk. 140,000. If you sell 1000 software per month and the average revenue is Tk. 90, what should be your short-run decision regarding shut down and long run decision regarding exit?

4. On x and y axes, draw ATC, AVC and MC curves and four alternative demand curves that the Perfectly Competitive Firm might face. a) Draw D1 such that the firm makes a profit. b) Draw D2 such that the firm breaks even (profit=0).

c) Draw D3 such that the firm is at its shut down point. d) Draw D4 such that the firm would shut down rather than produce.

5. Suppose the following table contains data of a Monopoly.

Output Price (Tk.) Total Cost (Tk.) 072 266 458

64 12 83 20 10 2 35___________

a. What is the profit maximizing quantity of this firm? b. What price the above firm chooses to sell its output? c. What is the maximum amount of profit?

6. Your friend has discovered a secret formula that lets people do an hours worth of studying in 5 minutes. So far, he has sold 100 doses, and faces the following average total cost schedule:

Q ATC

99. 99 Tk. 99

100. 100 Tk. 100

101. 101 Tk. 101

If a new customer offers to pay your friend Tk. 150 for one dose, should he make one more? Explain