1. Assuming an upward-sloping marginal cost curve, draw the marginal cost and firm demand curves for a monopolist. Then identify the quantity supplied by a perfectly price discriminating (first degree price discrimination) monopolist and the efficient quantity.
2. Elon Musk had two options for setting up the first major Tesla factory. He could either automate it heavily, with variable costs of $10,000 per Tesla and $10 billion in capital (assume it will last forever and he can sell it next year for $10 billion as well), or rely on more labor and have variable costs of $19,000 per Tesla with $1 billion in capital (assume it will last forever and he can sell it next year for $1 billion as well). If his best outside opportunity returns 10% and/or he can borrow at 10%, what is the average total cost of producing 100,000 cars a year using each method?
3. Describe a marginal transaction in the market for loanable funds. Assume a positive market clearing equilibrium price. What is being exchanged?What does the price represent?