1. As price moves from $15 to $10, quantity demanded increases from 4000 units to 6000 units.

1. As price moves from $15 to $10, quantity demanded increases from 4000 units to 6000 units. What is the elasticity of demand?(Use the mid-point formula).
2. Assume a monopolist is not able to practice price discrimination. The monopolist sets output at the level corresponding to the point where marginal cost cuts marginal revenue from below. Assume the monopolist can earn a positive economic profit. What cost should the monopolist subtract from price to determine the average economic profit per unit?
3. Why is the perfectly competitive firm’s demand curve horizontal?
4. A perfectly competitive firm faces a price that lies between its average cost and its average variable cost. Should it shut down in the short run? Explain your answer.

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